US
USD is mixed near a one-week high, while stocks and bond yields are mostly firmer. Major FX pairs are pressing key technical levels that could trigger sharper moves if broken. EUR/USD is near support at its 200-day moving average (1.1634), USD/JPY is testing resistance at 160.00, and AUD/USD is challenging resistance at 0.7200. KRW is outperforming while the KOSPI underperformed.
Brent crude oil held gains near $90 a barrel after the Trump administration ruled out reviving June’s memorandum of understanding with Iran. Nonetheless, upside pressure on crude oil prices appears limited. Goldman Sachs estimates oil exports from the Persian Gulf have recovered to around two-thirds of pre-war levels as more vessels transit the Strait of Hormuz.
Fed Chair Kevin Warsh delivers keynote remarks at the Jackson Hole Economic Symposium (3:00pm London, 10:00am New York). Clear policy signal will likely be scarce given Warsh’s reluctance to provide forward guidance and the absence of a Q&A session. Instead, Warsh may preview the Fed five task forces’ early findings on communications, the balance sheet, economic data, productivity and jobs, and the inflation frameworks.
In the past, Fed chairs had on several occasions used the annual retreat in Wyoming to signal major shifts in the policy outlook. Ben Bernanke opened the door to QE2 in 2010 and prepared markets for QE3 in 2012, while Jay Powell unveiled average inflation targeting in 2020, delivered a hawkish shock in 2022, and signaled the start of the easing cycle in 2024.
The symposium has also produced prescient warnings. In 2005, Raghuram Rajan cautioned that financial innovation had made the system more fragile. Two years later the subprime crisis erupted, triggering the 2008 global financial crisis. Rajan is currently co-leading the Fed’s task force on balance sheet policy and delivered hawkish remarks overnight. In his view, “the Fed should be raising rates or should have raised rates already” as policy is not restrictive.
Unsurprisingly, Cleveland Fed President Beth Hammack (dissented in favor of a hike in July) echoed Rajan’s comments, flagging that “the longer inflation stays above our objective, the harder it will be for us to bring it back down.” Kansas City Fed President Jeff Schmid (hawkish non-voter) also argued for tighter policy noting “For me I think it might be accommodative on the short end…So we’ve got work to do.”
By contrast, Boston Fed President Susan Collins (non-voter) suggested the Fed can afford to keep rates on hold. Collins noted “I continue to see rates as mildly restrictive,” pointing out that the annualized monthly change in the market-based core PCE, which drop components with extreme movements, was around the Fed’s 2% target in July.
We share Collins’s view, leaving USD vulnerable to a dovish repricing. Fed funds futures currently price in 35% odds of a 25bps hike to 3.75-4.00% at the next September 16 meeting and a total of nearly 50bps of tightening over the next twelve months.
The BLS preliminary annual payroll benchmark revision is due today (3:00pm London, 10:00am New York). An 185k upward adjustment is expected, suggesting payroll growth was understated by roughly 15k per month in the twelve months to March 2026. The backward-looking revision won’t shift the dial on Fed rate expectations. But a downgrade could add to soft hiring concerns.
CANADA
USD/CAD is trading just above support at its 200-day moving average (1.3840). Canada’s economy is expected to recover in Q2 boosted by domestic demand and exports (1:30pm London, 8:30am New York). Real GDP is seen rising 3.4% SAAR vs. -0.1% in Q1, which would be stronger than the Bank of Canada’s (BOC) 2.5% projection. Statistics Canada’s advanced July GDP estimate will also offer an early read on Q3.
However, the worsening US-Canada trade war threatens to cut the rebound short. Encouragingly, core inflation near 2% gives the BOC room to stay on hold and cushion the economy. As such, market pricing 75bps of BOC hikes in the next twelve months look too aggressive, leaving scope for a dovish repricing and USD/CAD firmer near 1.4000.
