Dovish undertones from Powell at Jackson Hole - TDS

Analysts at TD Securities explained that the dovish undertones from Powell at Jackson Hole provided a tailwind to risk assets, with US equities up 0.6% while the TSX underperformed (+0.2%). 

Key Quotes:

"Powell's speech also helped Treasuries rally from intraday lows as the curve flattened while Canadian rates saw little change."

"The USD traded on its back foot into the weekend on a broad selloff against G10 currencies. AUD (+1.1%) rallied on the leadership vote that saw Scott Morrison appointed PM while EUR (+0.7%) traded through 1.16 to a three week high. CAD (+0.4%) saw little reaction to a CNBC interview with Governor Poloz ahead of his panel discussion in Jackson Hole."

"The data calendar shifts to a lower gear next week with Chinese PMI the most notable release."

What We're Watching in Markets

"With little new in Chair Powell's Jackson Hole remarks, we see little to stand in the way of flatteners. We continue to look for 5s30s to reach 10bp. Near-term direction in Treasuries is likely to be driven by risk sentiment, particularly as trade discussions remain ongoing."

"For G10FX, we monitor developments in the Tsy space where 10yr yields have neared the bottom end of its multi-month range. With some cracks in the USD beginning to surface - particularly off the back of Fed commentary (such as the minutes and Powell's speech) that neutral policy is near - another leg lower in yields could soften the USD further. With this in mind, we are particularly mindful of USDJPY; the pair has found resistance near 111.50 and a return below 110 could be meaningful for the broader G10 - especially now that the PBoC plans to re-implement the counter-cyclical factor."