Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower, pulling back from records reached on Friday, which was fueled by rate cut hopes as markets now shift their attention to Nvidia earnings on Wednesday and PCE inflation data later in the week. At the Jackson Hole Symposium, Fed Chair Jerome Powell signaled concern over a weakening labor market and hinted at a possible rate cut in September. Markets now price in an 83% chance of a cut, pending confirmation from upcoming data, especially July’s core PCE inflation and August nonfarm payrolls. Friday’s data on July PCE inflation—the Fed’s preferred measure of inflation—will be the next key item of data ahead of the central bank’s September policy meeting.
Other data set for release this week which should add further clues on the state of the US economy are July durable goods orders and the Conference Board consumer confidence survey for August on Tuesday, followed by the second estimate of second-quarter GDP and weekly jobless claims on Thursday. Additionally, new home sales data for July later in the morning on Monday, the Case-Shiller home price index for June on Tuesday, and the University of Michigan’s final consumer survey for August on Friday will also signal clues on the inflation print and consumer mindset.
On Friday, the Dow Jones surged over 1.8%, to score its first record of 2025. The S&P 500 gained 1.5%, finishing just shy of a fresh all-time high. The Nasdaq jumped 1.9% as investors cheered signals from Fed Chair Powell that rate cuts could start as early as September. Nvidia will report earnings after the bell of Wednesday in a very anticipated earnings call as markets have grown weary over the momentum of the tech rally, with investors last week reducing tech positions before Friday’s rally.
CURRENCY FUTURES
The USD index edged higher following a sharp fall on Friday after Fed Chair Powell’s dovish comments that opened the door for a rate cut next month. Markets are now pricing in a 83% chance of a 25 bps rate cut in September. Powell did note that risks to inflation remain elevated, causing some investors to scale back expectations for the amount of easing this year, which should give the dollar a solid floor. PCE inflation data due Friday will offer further clues on the inflation picture and possible moves from the Fed.
Euro futures are lower as the euro fell against a stronger dollar. German business confidence improved slightly this month, a survey showed, offering a glimpse of hope for an economy struggling to gain momentum. The Ifo Institute said Monday that its business-climate index increased to 89.0 in August from 88.6 in July. Companies were brighter about their prospects ahead, but a little more pessimistic about current conditions. France will release consumer confidence survey data for August on Tuesday, while Germany’s GfK consumer climate survey is due on Wednesday. The European Union and Italy will release consumer and business confidence data for August on Thursday. These come after recent better-than-expected provisional August purchasing managers’ surveys for Germany, France and the eurozone, and investors will be looking to see whether this trend is replicated elsewhere. Friday will be a big day for eurozone data. Provisional inflation figures for August from Germany, France, Spain and Italy will be released, alongside German labor market data for August. German retail sales for July are also due Friday, plus a string of data from France including July consumer spending, producer prices and second-quarter jobs figures. Italy will also publish second-quarter GDP.
British pound futures edged lower, under pressure from a stronger greenback. This week will be a quiet week of data over in the UK, markets will be closed Monday for holiday. British Retail Consortium’s shop price index for August is due Tuesday, while the Nationwide August house price index is due during the week. Money markets now see less than a 50% chance of a rate cut before end-2025, with only about a 36% probability of a quarter-point reduction this year and the next cut likely priced in for spring 2026. This comes after a hot inflation print last week, which saw inflation rise to 3.8%, although many of the price pressures are expected to be one-off. Still, the inflation remains well above the Bank of England’s target and in its most recent policy meeting, policymakers signaled they were more concerned with rising inflation that they were with the supporting the economy. A reduction in the amount of easing this year should provide support to the pound over the dollar.
Japanese yen futures are lower, despite hawkish comments from Bank of Japan Governor Kazuo Ueda. Speaking at the Federal Reserve’s Jackson Hole conference on Saturday, Ueda said wages in Japan are expected to rise further amid a tightening labor market, signaling confidence that conditions for another interest rate hike are coming together. Following stronger-than-expected second-quarter growth, investors will look to the next batch of data for confirmation of the economy’s health. Key releases include Tokyo inflation—considered a leading gauge of nationwide trends—along with retail sales, labor-market and industrial-production data. Strong data here could fuel expectations on when the Bank of Japan will deliver a rate hike, which could come as early as October.
Australian dollar futures are higher, fueled by dovish comments from Fed Chair Powell, helping the Aussie gain over the greenback. Attention this week will center around the release of minutes from the Reserve Bank of Australia’s last policy meeting, where the nine-member board voted unanimously to cut the official cash rate. Inflation figures on Wednesday will offer further clarity on the extent of future easing.
INTEREST RATE MARKET FUTURES
Futures are lower across the curve, reversing some of Friday’s gains after Powell opened the door for a rate cut during his speech on Friday. However, investors have turned cautious ahead of upcoming data this week, signaling a potential overreaction to what was a relatively well-balanced speech. Powell emphasized that while unemployment remains low, risks to the labor market are building and monetary policy is still “restrictive,” suggesting that adjustments may be warranted. He also cited changes in tax, trade, and immigration policies as factors reshaping the economic outlook. Thursday’s second estimate of second-quarter GDP and Friday’s July PCE price index will be closely watched. Stronger growth or sticky inflation could reinforce expectations of a slower easing path and provide support for higher yields, while softer readings should weigh on yields. Fed funds futures are pricing an 83% chance that the Fed will cut rates by 25 bps in September. There is still a high degree of uncertainty when it comes to the interest rate path, and recent PMI and PPI data has shown significant indications that inflation could persist for the coming months and peak in the fall.
The spread between the two- and 10-year yields rose to 55 bps from 51.9 bps on Friday.
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