Week Ahead: Jackson Hole Symposium, FOMC minutes, Japan & Canada CPI 

Weekly Recap

The USD fell and U.S. stocks posted modest gains last week, and the S&P 500 and the NASDAQ reached record highs, following mixed inflation data. 

US CPI was cooler than expected, boosting hopes of a rate cut in September, although higher than expected PPI inflation tempered some of that earlier optimism. Despite the mixed figures, investors still expect the Fed to cut rates in its September meeting, with the CME Fed watch tool pricing an 85% probability of a cut after reaching almost 100% earlier in the week. 

On Friday, Trump and Putin met in Alaska to discuss a potential ceasefire in Ukraine. Following the meeting, President Trump has told Ukrainian leader Zelensky to give up Crimea and NATO ambitions for peace. Gold continues to trade in a holding pattern. 

Canada CPI (Tuesday) 

The BoC will use the inflation data to inform its future interest rate decisions, although the central bank will also be assessing the impact of U.S. trade policies. The BoC left rates unchanged at 2.75% in the July meeting, amid a unanimous decision. 2.75% is the centre of the BOC’s neutral estimate, suggesting there may be limited room for further cuts depending on tariff impacts. The tariff impacts on consumer inflation have been modest, wage growth has also eased, and the recent appreciation of the loonie has lowered import prices. BoC appears comfortable with current inflation trends and could focus more on the labour market and economic growth going forward. Expectations are for Canada CPI to rise 0.4% MoM in July, up from 0.1%. Hotter inflation could pull USD/CAD lower. 

RBNZ rate decision (Wednesday) 

The market is pricing in an 89% chance of a 25 basis point rate cut by the RBNZ on Wednesday, which would take the official cash rate to 3%. The central bank left rates unchanged at 3.25% in its last meeting following a streak of 6 consecutive rate cuts. The RBNZ signalled it was prepared to cut rates further if inflation pressures continue to ease as projected. Policymakers noted that the economic outlook remained highly uncertain owing to global policy uncertainty, with tariffs expected to reduce global economic growth, which could slow the pace of NZ’s economic recovery and further reduce inflationary pressures. The latest inflation data for New Zealand for Q2 were softer than expected, supporting the case for a cut, while job growth contracted in Q2 as unemployment ticked higher, which could also support easing policy. A dovish-sounding RBNZ could pull NZD/USD lower. 

FOMC minutes (Wednesday) 

The Fed left rates unchanged at 4.25 to 4.5% in line with expectations at the meeting, with governors Waller and Bowman voting for a 25 basis point cut. Following a weaker than expected July jobs report and US CPI in line with expectations, traders will be particularly attentive to any arguments for rate cuts, which could help boost sentiment and the S&P500 higher. The July statement noted high levels of uncertainty surrounding the economic outlook, with recent indicators suggesting that activity moderated in H1, which is a change from June’s description of solid growth. The Fed reiterated it would assess incoming data and the evolving outlook. In the conference, Powell adopted a slightly more hawkish stance amid concerns over rising inflation.  

UK CPI (Wednesday) 

Last week, UK jobs data pointed to a labour market that continues to cool as companies slow hiring plans. However, wage growth, a metric closely watched by the BoE policymakers, remains sticky at 5%, which is well above a level consistent with the Bank of England’s 2% inflation target. Meanwhile, vacancy rates are at their lowest level in five years. June inflation showed price pressures accelerating, rising to 3.6% annually from 3.4% in May. The increase was driven by higher transport costs and food inflation, as the latter reached 4.5%, its highest level since February last year. The BoE has said it expects inflation to continue trending higher, with 4% expected by Q3. Sticky inflation will see the market push back on BoE rate cut bets, which could lift GBP/USD higher. The market is currently pricing in the next rate cut in February next year. 

Fed Jackson Hole Symposium (Thursday- Saturday) 

The annual Federal Reserve Jackson Hole symposium will take place between Thursday and Saturday of this week. The highlight will be Federal Reserve Chair Jerome Powell’s speech on August 22nd at 10:00 AM EDT. The Fed has historically used the symposium to signal upcoming policy changes, although that hasn’t always been the case. This year will be of particular interest as it comes as President Trump continues to sound off in the direction of Fed Chair Powell for refusing to cut rates. At the most recent FOMC meeting, the Fed left rates unchanged at 25 basis points. The latest July inflation figures showed that CPI held steady at 2.7% whilst there are signs of a slowing jobs market with US payrolls weaker than expected. The Jackson Hole symposium is titled “Labour markets and transition, demographics, productivity and macroeconomic policy,” which seems particularly relevant given the large revision to recent payroll numbers. Expectations surrounding a September rate cut are at around 85%, with potentially another cut in December. A more dovish-sounding Fed could pull the USD lower and lift US stock indices such as the Nasdaq to record highs. 

EZ PMI (Thursday) 

Eurozone manufacturing PMI is expected to come in at 49.5, down from 49.8 in July. The services PMI is expected to ease to 50.7, down from 51. This takes a composite PMI, which is considered a good gauge for business activity, to 50.6, down from 50.9, an 11-month high in July, where the level 50 separates expansion from contraction. In terms of sentiment proxies, German ZEW economic sentiment showed a notable pullback as respondents appeared disappointed by the EU-U.S. trade deal. August’s PMI data could signal some softening in growth momentum. Weak data could pull on the EUR/USD. 

Japanese CPI (Friday) 

National core CPI for July is expected to be 3% YoY, down from 3.3% in June. Headline CPI is expected to cool to 3.1% down from 3.3% as falling utility prices offset rising food costs. Easing energy prices and government subsidies could keep headline inflation on a downward trend, although services inflation remains firm, underpinned by wage growth and solid domestic demand. Investors will be watching for signs of underlying inflation persistence, which could impact Bank of Japan monetary policy. Currently, the markets are pricing in around 17 basis points of rate hikes this year following stronger than expected Japanese GDP data. Any signs of sticky inflation could pull USD/JPY lower. 

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