Game of Central Bankers [Video]
|The Day So Far…
A particularly quiet start to proceedings which is to be expected given the predominate focus on the Jackson Hole Symposium at the end of the week. The historical importance of the event, in combination with the context of policy tightening on the horizon, leads many to believe that the keynote speech from Fed Chair Janet Yellen on Friday will be key as to predicting Fed policy direction in the near-term. The decision for the Fed to follow its more hawkish course is subject how confident they can remain on the direction of their inflation outlook and at the moment subtle signals from Yellen could materially alter the markets expectations on the probability of a final rate hike which is currently pencilled in for December.
Separate to this ECB President Mario Draghi is speaking at the Lindau economics symposium in Germany on Wednesday the 23rd August. This I feel will be important for ECB watchers as the WSJ reported over the weekend that Mr Draghi is likely to lay out an end to Europe’s Quantitative Easing programme at the Jackson Hole meeting, an event he is attending for the first time in three-years. Given the market sensitivity to any potential policy hints I think it would not be unusual to hear source comments circulate either today or tomorrow and then for the ECB President to use the speech on Wednesday as a platform to front-run the Jackson Hole delivery with the objective being to drip feed the market with minor communication changes without destabilising sentiment with any drastic surprises when the official speech hits later in the week.
In terms of geopolitics, the North Korean debate has returned to the fold as US and South Korean military exercises get underway in the Peninsula. Although this is a regular annual event the fact it will be running for the next 10 days means that tensions tested especially in the context of the recent war of words between US President Donald Trump and the North Korean government.
The Day Ahead…
Looking ahead the calendar is very light so today is about remaining conservative unless any unscheduled news breaks. What the news could be I think comes in four guises these being; 1) any provocations in North Korea 2) Further Trump details on corporate tax plans 3) any meaningful comments from oil ministers as technical talks are held today 4) any source comments ahead of Draghi’s speech on Wednesday.
Finally, as well reported today millions of American’s will be awaiting the first total ellipse to unfold in nearly a century later today. While this should be a spectacular event in itself I would keep in mind the impact this may have on trading volumes meaning that if liquidity wasn’t already low enough any flash move in the market, whether driven by order flow or fundamental news, may be sharply exaggerated.
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