Written Commentary
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. The bonds traded in a tight range yesterday, which is expected to continue for the rest of the week until Powell’s speech at the end of the week. Fed Funds contracts are pricing an 83.1% chance of a 25 bps rate cut in September, slightly lower than yesterday’s 84%.
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 rose to 55.9 bps from 55.3 bps on Monday. 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, where it remains as of today.
CURRENCY FUTURES
The USD index dipped against most major currencies as markets assess the outcome of a summit between US, Ukrainian, and European leaders as markets await the Federal Reserve’s Jackson Hole symposium for policy signals. President Trump told President Zelenskiy on Monday that the United States would provide security guarantees in any deal to end the war with Russia. The developments did not give FX markets any direction.
Euro futures are higher as markets digest yesterday’s high-stakes meeting with several European officials, President Trump, and President Zelenskiy. NATO Secretary General Mark Rutte called Trump’s meeting with Zelenskiy and European leaders “very successful,” while Trump said he had contacted Putin to arrange a meeting with Zelenskiy, followed by a trilateral summit. On the monetary policy front, ECB rate expectations remain stable, with markets pricing no change for September. 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.
British pound futures are higher against the dollar as focus turns to UK consumer price inflation due tomorrow. Headline and services inflation is expected to have accelerated in July, with inflation expected to peak around 4% in September. 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 held steady in the overnight session as focus shifts to government data on Friday, which 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. Data released last week showed the economy expanded more than expected in the second quarter, supported mainly by net exports despite headwinds from US tariffs. 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.
Australian dollar futures are little changed in a quiet week of data on the Australian calendar. Australia’s Westpac-Melbourne Institute Consumer Sentiment Index surged 5.7% in August 2025 to 98.5, the highest level since February 2022, following a 0.6% rise in July. Investor focus will turn to flash PMIs and scheduled speeches from Reserve Bank of Australia officials later in the week. 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 mixed, with the S&P and Nasdaq both falling while the Dow traded flat ahead of some large retail earnings. Home Depot reported second-quarter earnings, with its profit falling slightly short of expectations. Target will report earnings tomorrow, followed by Walmart on Thursday, where the group’s results could provide insights into how consumers are faring as tariff effects begin to take their effect on the economy.
Housing starts in July beat expectations, with 1.428 million new starts vs. an expected 1.290 million, growing 5.2% since June. Building permits, on the other hand, shrank from June, with 1.354 million new permits issued by the government, below forecasts and June’s 1.393 million.
Markets will continue to await remarks from Fed Chair Powell’s speech on Friday at the Fed’s Jackson Hole symposium. The event is often indicative of policymakers’ views on interest rates and could offer clues as to what will come next at the Fed’s meeting in September. On the data front, US purchasing managers’ surveys on manufacturing and services activity in August will be released on Thursday.
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