Markets eye key Powell speech

HONG KONG

All eyes are on a symposium this week in Jackson Hole, Wyoming where Fed boss Jerome Powell will deliver a speech that will be followed for an idea about the bank’s next moves.    

A dip in price rises and signs of economic slowdown had raised hopes policymakers would ease up - and possibly cut next year - after two successive, 75-basis-point hikes, helping equities rally globally.    

But that optimism has slowly been eroded in recent weeks as Fed officials, including Powell, have warned that the battle against inflation was far from won, particularly as the jobs market remained resilient.      

Jonathan Millar of Barclays said it was unlikely Powell would signal a slowdown in rate hikes this week.    

“It does seem like what we’ve heard from Powell so far suggests there’s quite a high bar for them to transition from aggressive hikes” to 25 basis points.     

The prospect of more U.S. hikes to come has given another boost to the dollar.    

The stronger greenback was helping to keep oil prices down, while downward pressure was being enhanced by speculation rising about a possible Iran nuclear deal that could ease a supply crisis caused by Russia’s invasion of Ukraine.    

“The global balance for the remainder of the year is not as tight as many were expecting, with Russian supply holding up well,” said Warren Patterson, of ING Groep NV.    

“While it may take several months for Iran to get production back to pre-sanction levels in the event of a deal, in the short term, they should still be able to boost exports by relying on storage.”