Last week’s US inflation data did little to upset the broader macro narrative, with core PCE coming in broadly in line with expectations. However, Federal Reserve Chair Kevin Warsh’s speech at the Jackson Hole symposium served as the primary market-moving catalyst.
His notably hawkish tone drove the financial markets to reprice the probability of a September interest rate hike from roughly one-in-three to greater than 50-50, while pricing in nearly one and a half cumulative rate hikes by the end of the year. Consequently, the yield curve flattened and the US Dollar gained upward momentum.
Busy Economic Data Calendar Ahead
This week brings a significantly heavier calendar on the economic data front. In the United States, the JOLTS job openings report is scheduled for Tuesday, followed by the ISM Manufacturing and Services indexes on Tuesday and Thursday respectively, with both expected to hold in expansionary territory.
The headline event, however, arrives on Friday with the nonfarm payrolls report. Consensus estimates project a rebound to 58,000 new jobs following last month's surprisingly weak print of -23,000.
Foreign Exchange Market Movements
Currency pairs are reflecting the shifting macroeconomic dynamics. GBP/USD has lost its recovery momentum and retreated after climbing above the 1.3550 level earlier in the day. The US Dollar stays resilient against its major rivals following Fed Chair Warsh's hawkish comments at the Jackson Hole Symposium, which effectively limits the currency pair's upside potential. Simultaneously, re-escalating tensions in the Middle East are encouraging investors to adopt a cautious stance.
Meanwhile, EUR/USD clings to moderate daily gains at around 1.1600 during the second half of trading on Monday. Data released out of Germany indicated that annual Consumer Price Index inflation edged higher to 2.9% in August from 2.8% in July, matching expectations. As investors continuously reassess the probability of a September Federal Reserve rate hike following the Jackson Hole symposium, the US Dollar continues to hold its ground and cap the pair's gains.
Precious Metals and Digital Assets
Gold holds its recovery near $4,450 during the European session on Monday, moving away from sub-$4,400 levels, although its upside potential appears constrained. A softer US Dollar provides some foundational support to the precious metal, helping it recover its earlier intraday losses. At the same time, Fed Chair Kevin Warsh's remarks regarding curbing inflationary pressures continue to lift rate hike bets, which may keep a lid on any meaningful recovery for the non-yielding bullion asset.
In the digital asset space, Dogecoin trades near key support around $0.081 after declining more than 12% over the previous week. On-chain data indicates that some whale wallets are actively taking profits following DOGE’s recent price surge. Derivative data points to mild underlying strength, whereas technical indicators suggest that bullish momentum is fading, leaving the meme coin’s near-term market outlook mixed.
Diesel Market Records Historic Highs
While the broader oil market may appear calmer than it did a few months ago, the diesel market is signaling a drastically different story. The US diesel crack spread, representing the premium of ultra-low sulphur diesel futures over WTI crude, recently surged above $100 per barrel for the first time in history, hitting an intraday record of just over $102.00.
