Five fundamentals for the week: Investors eye Powell's Jackson Hole speech and summit fallout

Will the leaders of Russia and Ukraine meet? The world hopes that the flurry of summits leads to the end of the war – and to economic opportunities. Markets will also be watching the Federal Reserve (Fed), especially at the bank's Jackson Hole Symposium at the end of the week.

1) Peace in our time?

US President Donald Trump will host his Ukrainian counterpart Volodymyr Zelenskyy at the White House after meeting Russian President Vladimir Putin in Alaska on Friday.

Recent comments from Trump suggest he leans toward Putin's view that the war should end with a comprehensive peace deal rather than a ceasefire first, giving up Crimea and that Ukraine should never join NATO. Reports suggest that Putin also asked for Kyiv to accept further territorial concessions.

On the other hand, Trump's envoy Steve Witkoff suggested “Article 5-like” security guarantees, referring to NATO's clause requiring all countries to come to the defense of one.

Demarcating a de facto border and security guarantees are the most important issues. 

Zelenskyy will be flanked by the leaders of the UK, Germany, France, Italy and other senior Europeans in the White House. He may later meet his Russian counterpart, perhaps on Friday.

There is significant uncertainty about these developments. An end to the multi-year war would boost the Euro (EUR) and Stocks while weighing on Oil and Gold. Ongoing hostilities cannot be ruled out as previous attempts at diplomacy have failed.

2) FOMC Meeting Minutes may sound dovish

Wednesday, 18:00 GMT. Fed Chair Jerome Powell sounded hawkish following the last interest rate decision, showing concern about inflation and being upbeat about the economy. However, two of his colleagues voted to slash borrowing costs in a rare move.

What was the tendency inside the room? The FOMC Meeting Minutes may shed some light on the deliberations late last month. It is essential to note that the document is revised until the last moment to convey a message to markets.

I expect the Minutes to be relatively dovish, reflecting the tone of the dissenting members and the data published since then: revised jobs data showed a much weaker labor market. A dovish stance would weaken the US Dollar (USD) while boosting Stocks and Gold. A hawkish tone would do the opposite.

3) US Jobless Claims will probably show labor market strength

Thursday, 12:30 GMT. Last week's Initial Jobless Claims remained low, at 224K, and a similar outcome is likely this week. The even-better news from last week was the drop in Continuing Claims after climbing beforehand.

Will this report be encouraging again? While the data are volatile, the labor market is of growing importance, and any fluctuations could move markets.

4) S&P Global PMIs are expected to slide

Thursday, 13:45 GMT. Contrary to the ISM data, S&P Global's Purchasing Managers' Indexes (PMIs) have been upbeat: only 50.1 in the ISM Services PMI vs. 55.7 in the parallel figure from S&P Global.

How is America's largest sector doing? Expectations are for a decline to 53.3. That would still be above the 50-point threshold separating expansion from contraction, but it would mark a slowdown. Another upbeat figure would cause more confusion.

5) Powell's Jackson Hole speech is critical for the remainder of the year

Friday, 14:00 GMT. Central bankers from various countries will convene in Jackson Hole, Wyoming, to the annual Symposium organized by the Kansas City Fed. Historically, the cool venue at the foothill of the Teton Mountains has been an opportunity for Fed Chairs to lay out significant changes in monetary policy.

Will Powell signal he will cut interest rates in September? Will he indicate the cycle could include a total of 150-175 basis points, as Treasury Secretary Scott Bessent desires?

On the one hand, job growth dropped to an average of 35K per month in the past three months, a pace that could lead to job losses.

On the other hand, inflation has not been crushed. The University of Michigan's inflation expectations measures have risen in August, and so have producer prices. And while the Consumer Price Index (CPI) report was far from scary, an annual core CPI of 3.1% is still uncomfortable for the Fed. And, tariffs may still push costs higher.

Markets are unsure which way Powell will go, allowing for a substantial move in either direction.

He may also disappoint by refraining from speaking about the upcoming decision and for good reasons. There is one more NFP and another CPI until the next Fed decision on September 17. In such a scenario, I expect markets to perceive his speech as hawkish by not signaling a cut in September.

Final thoughts

Low summer liquidity means markets are moving slowly – but surprising news could trigger considerable market moves. Trade with care.