Written Commentary
CURRENCY FUTURES
The USD index edged higher ahead of a meeting between President Trump and his European and Ukrainian counterparts. Markets will also keenly await remarks from the Federal Reserve’s Jackson Hole symposium for policy signals. The symposium runs from Thursday through Saturday, with this year’s theme being ‘Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.’ The minutes to the last Fed meeting, due on Wednesday, will also be closely watched. Markets are pricing in an 84.9% chance of a rate cut from the Fed in September per CME data.
Euro futures fell lower as market attention settled on the White House Monday for an outline of a potential Russia-Ukraine peace deal. President Trump said he would press Zelenskiy for a quick settlement after talks with Putin, who signaled openness to US-European security guarantees for Ukraine. On the data front, preliminary purchasing managers’ surveys on manufacturing and services activity during August in France, Germany, and the eurozone as a whole will be released on Thursday. These will be among the first indicators of how US tariffs on European goods have impacted activity and prices. Germany will release second-quarter GDP data Friday, while France’s business survey for August is also due. Germany will conduct two government-bond auctions during the week, selling 4.5 billion euros in October 2030 Bobl on Tuesday and a combined 2.5 billion euros in August 2046 and August 2054 Bunds on Wednesday. France will have bond auctions on Thursday.
British pound futures edged lower, as focus remains on the highly anticipated meeting between President Trump, President Zelenskiy, and European officials Monday. Inflation data for July on Wednesday will be the highlight of the week for the UK economic calendar. Investors have scaled back expectations for interest-rate cuts by the Bank of England in the coming months due to recent data, including higher-than-expected inflation for June. Annual inflation was 3.6% in June, well above the BOE’s 2.0% target, and is expected to rise even further in July. UK money markets currently price in only a 28% chance of a rate cut in November and a 60% chance of a reduction in December, per data from the LSEG. Preliminary UK purchasing managers’ surveys on manufacturing and services activity during August on Thursday, followed by GfK’s consumer confidence survey for August and July retail sales on Friday, will round out the week. Any signs of economic weakness could bolster rate-cut expectations.
Japanese yen futures are lower. Data released Friday showed the economy expanded more than expected in the second quarter, supported mainly by net exports despite headwinds from US tariffs. Japanese officials also downplayed remarks from US Treasury Secretary Scott Bessent, who said the Bank of Japan was “behind the curve” on policy in what appeared to be an attempt to pressure the central bank to raise rates. On the data front, machinery orders figures for June are also due Wednesday and are expected to show a further slowdown in July exports due to the impact of US tariffs. Government data scheduled to be released on Friday is expected to show that inflation remains well above the central bank’s 2% target. Consumer prices excluding fresh food are expected to have risen 3% from a year earlier in July, according to a poll of economists by data provider Quick. That compares with the 3.3% increase recorded in June.
Australian dollar futures are little changed in what is a muted week for economic data for Australia. Investor focus will turn to the Westpac Consumer Confidence Index, consumer inflation expectations, flash PMIs, and scheduled speeches from Reserve Bank of Australia officials. On the monetary policy front, market participants are increasingly expecting further easing by the RBA before year-end. While no immediate action is anticipated, traders have priced in an additional 50 basis points of rate cuts by November.
STOCK INDEX FUTURES
Stock index futures are lower as investors eye a US-Ukraine meeting following a summit between President Trump and President Putin. Markets will also be awaiting remarks from Fed Chair Powell’s speech on Friday at the Fed’s Jackson Hole symposium. On the data front, US purchasing managers’ surveys on manufacturing and services activity in August will be released on Thursday, and housing starts data for July will be released on Tuesday.
On the corporate calendar, results from Walmart, Target, and Home Depot highlight a slowing earnings schedule that sees the retail sector remain the key focus with potential clues into consumer spending. Last week, the Dow climbed 1.71%, the S&P 500 added 0.94%, and the Nasdaq Composite gained 0.81%, with all three indexes hitting fresh record highs. Markets are increasingly betting on a Federal Reserve rate cut in September, even after recent data painted a mixed picture on inflation and employment.
INTEREST RATE MARKET FUTURES
Futures are higher across the curve as markets await the Fed’s Jackson Hole symposium and particularly Fed Chair Powell’s speech on Friday. Attention will also be paid to the minutes from the Fed’s last meeting, due on Wednesday. The minutes could offer clues as to how many on the committee are starting to see a September cut. Investors will also await developments between US President Donald Trump and Ukrainian President Volodymyr Zelenskiy.
US purchasing managers’ surveys on manufacturing and services activity in August will be released on Thursday. These will provide an up-to-date indication of how tariffs have impacted both activity and prices. Now that tariffs are in effect, the input cost component of the PMI surveys, particularly in the US, should give a sense of the impact of the higher tariffs on prices.
On the supply side, the US Treasury will auction $16 billion in 20-year bonds on Wednesday and $8 billion in 30-year inflation-protected TIPS on Thursday.
The spread between the two- and 10-year yields is 55.3 bps. On Friday, the yield curve steepened to its widest spread since October 2021, as markets are increasingly expecting the Fed to cut interest rates, even as inflation risks persist. The spread between the five- and 30-year yields on Friday was 108 bps.
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