Yields fall as Fed minutes, Powell speech in focus

Daniel Fowler
August 21, 2019

However, investor optimism is likely to be capped before a speech by US Federal Reserve Chairman Jerome Powell later this week at the Jackson Hole central bank conference.

The interest rate futures market has priced in 100 basis points of easing over the next year.

"In the other camp to Rosengren is US President Trump, who yesterday maintained the pressure on the Fed by tweeting that the Fed should cut rates by at least 100bp and possibly restart QE to support both the US and world economy".

"I think it's quite possible you have a very divided committee", she told Yahoo Finance's "The First Trade". "You've got those who are anxious about the economic outlook and who want to continue to preemptively cut interest rates to provide insurance against that potential risk of a recession", Girard said.

Other than the Fed, Trump claims the U.S. economy is in a near-perfect shape "doing great with China and other Trade Deals".

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China also unveiled interest rate reforms expected to lower corporate borrowing costs, which helped lift the market's mood, while the prospect of Germany's coalition government ditching its balanced budget rule to take on new debt and launch stimulus steps also boosted risk appetite.

The European Central Bank will also report its July minutes on Thursday, a day after the Fed's. "It would be better to deploy guidance now in an effort to avoid hitting zero".

"The Jackson Hole summit would be the ideal venue for the Fed to set or reset market expectations", said Kathy Lien, managing director of FX strategy at BK Asset Management.

"The major event is definitely Powell on Friday and we will see how he talks about the markets and what the expectations are for the September meeting", said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in NY. "That would be a disappointment for markets who want the confirmation that this Fed is going to be acting aggressively in the coming months".

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