PPI gives Powell food for thought at this week’s Jackson Hole event

• A mixed bag in Europe as we kick off a new week.
• Trump pushes for Ukraine concessions to end the war.
• PPI gives Powell food for thought at this week’s Jackson Hole event.

European markets have kicked off on a somewhat downbeat tone following on from a weekend that has been largely dominated by talk of Trump’s meeting with Putin in Alaska. Thursday’s PPI inflation gauge out of the US has provided grounds for concern over the potential resurgence in inflation pressures at the hands of Trump’s tariffs. This week brings a particular focus on the central banks once again with Powell’s appearance at the Jackson hole symposium potentially grabbing the headlines. Elsewhere, the inflation theme continues to play out thanks to the latest UK and Canadian CPI figures released on Tuesday and Wednesday.

Donald Trump’s meeting with Putin somewhat predictably ended with a lack of any agreement that ends the war with Ukraine, although he does enter today’s Zelensky meeting with a plan that is unlikely to go down well. From the Russian perspective, their desire to lock in their military gains as a newly expanded part of Russia will undoubtedly prove a huge stumbling block, while talk of land swaps are equally as unpalatable. Zelensky has already stated that the Ukrainian constitution makes giving up land to Russia “impossible”. However, another part of the solution lays in NATO membership, with Trump posting that he can end the war almost immediately if Ukraine pledges to give up aspirations on joining the group. While the US and Europe could still provide security guarantees as part of the deal, there will likely be a hesitancy given how the historical agreement to give up on their nuclear programme went. While we continue to see the 50% tariffs on India in part due to their purchases of Russian oil, the fact that China has remained untouched for doing the same means we are unlikely to see an escalation that could drive a spike in oil prices. 

This week brings fresh insights from the Jackson Hole Symposium, with the under-fire Fed Chair Powell expected to head up affairs on Friday. Coming hot off the heels of Thursday’s surprisingly high PPI figure (0.9%), we have seen a significant roadblock emerge that could hold back any major dovish shift from Powell. With the jobs creation clearly worsening in recent months, the Fed remain in a predicament on whether to assume that any initial warning signs do not turn into a fully-blown inflationary surge. From a market perspective, the lack of direction for the dollar highlights a distinct lack of confidence over exactly what the Fed Chair does in this key week.