22.08.25 - Waiting for Powell Speech

Jerome Powell speaks today at 16:00 CET at Jackson Hole.

Markets largely are pricing ing a 25 bps cut for September. Some investors even speculate about 50 bps despite recent inflation firming and no clear deterioration in jobs.

Markets: wait and see stance with US rates showing an upside tilt

• US 10-year Treasury yield is drifting higher, trading at 4.34%

• US dollar stopped the recent downtrend with a light uptick.

• US equity futures almost unchanged today

My View: I do not share the market’s consensus dovish baseline. With Jerome Powell leading, the Fed is unlikely to loosen prematurely, even with the current political pressure from the White House.

Based on current available data, I rather expect the Fed to stay on hold for September. This keeps a light upward pressure on yields in the near-term, validating my decision to close tactical long-bond positions.

I’m monitoring closely the USD/CHF: further yield upside could lift the dollar. If that materializes, I’m inclined to close or partially close the USD hedge against the Swiss franc.

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