MUFG emphasizes that this week’s US yield and USD movements will largely hinge on two critical events: the release of the FOMC minutes from the July 31 meeting and the upcoming Jackson Hole Symposium, particularly Fed Chair Powell’s speech.

Key Points:

• FOMC Minutes:

  • The FOMC meeting on July 31 marked the first time since ending its tightening stance that Fed Chair Powell explicitly put a rate cut on the table for the next meeting.
  • Powell’s dovish tone led to a 10bps drop in the 2-year yield on that day, making the upcoming minutes crucial for gauging the support for a possible September rate cut.
  • Recent comments from Fed officials, including Fed President Goolsbee and San Francisco Fed President Daly, suggest increasing support for rate cuts due to economic and labor market concerns.

• Jackson Hole Symposium:

  • The symposium is titled “Reassessing the Effectiveness & Transmission of Monetary Policy.”
  • Powell’s speech at the symposium could be another opportunity for the Fed to signal its readiness to begin cutting rates, particularly if he emphasizes the effectiveness of current restrictive policies.

Conclusion:

MUFG expects that both the FOMC minutes and Powell’s speech at the Jackson Hole Symposium could provide critical insights into the Fed’s readiness to commence rate cuts, potentially influencing US yield and USD movements this week.

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