There's a mismatch between financial markets's expectations and policymakers willigness to deliver and this dissent should come into sharp focus soon enough. The yen and Swiss franc were the top performers Tuesday while the US dollar lagged. The FOMC minutes from the Jul 31 rate hike are due up at 7 pm London. For a reminder of what the Fed said and reasoned on that day, please read on below.

inancial markets increasingly expect fiscal and monetary policymakers to stimulate the economy, but so far there's no clear signs such action is coming. It's a paradigm that plays out repeatedly during periods of economic slowdown and remains unresolved until market turmoil has manifested itself to spark genuine fears into policy makers.

Two big tests of whether we've come that far are coming up. The first test will be this evening's release of Fed minutes from the July 30-31 meeting. These will undoubtedly skew hawkishly because they were taken before the latest tariffs and market slide. They will also reflect Powell's assertions that the domestic economy is strong and that worries stem from trade and a foreign slowdown.

The second test will offer a current take as Powell delivers his Jackson Hole address. The market will demand a chance in tone from Powell's July 31 press conference but he's unlikely to be dovish enough to placate fears. On Tuesday, SF Fed President Daly (not a voter at this year's FOMC) said she sees solid domestic momentum and a continuing expansion.

At the same time, fiscal hopes are also precarious. The lack of enthusiasm for US tax cut talk underscores how difficult it will be to pass anything through Congress. In Italy, a snap election would risk an automatic VAT hike. The UK is a prime candidate for some fiscal help but is essentially paralyzed through the fall due to Brexit and the likelihood of an election. Canada also faces an October vote.

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