00:00 Speaker A
Well, today’s market movers are mainly impacted by the events at Jackson Hole, but also the war in Ukraine. We start with US Treasuries. Bond investors are heading into today’s much anticipated Jerome Powell speech largely expecting the Federal Reserve chair will indicate policymakers will start cutting interest rates next month. There’s a good reason why they feel this way. In recent years, he has used the occasion to make market-moving policy news, with investors zeroing in on whether the Fed chair pushes back or not on the current pricing for rate cuts. Now interest rate swaps have retreated in recent days amid hawkish comments from other Fed officials and mixed economic data. But the market still shows about a 70% chance of a quarter point cut at the September meeting and close to 50 basis points of easing for 2025. Now a hawkish tone during the speech will likely weigh on shorter dated government bond yields. It may also pressure, put add pressure to a recent series of large trades in the options markets which have targeted on outside rate cut next month and a total of 75 basis points of reductions by the end of the year. Shorter dated yields have already moved around 11 to 16 basis points lower across two and five-year notes in recent weeks, holding onto some of the rally that was triggered by weak July employment data. Meanwhile, benchmark 10-year yields are holding steady at around 4.33% today. Okay. Let’s move on to the world of crypto as that too is feeling the Jackson Hole impact. The price of Bitcoin is holding steady at around 113,000 mark ahead of that speech. The world’s largest cryptocurrency by market capitalization rose about 1% on Thursday, rebounding from a two-day slump earlier in the week. Still, Bitcoin remains well below its recent record high of more than 124,000 it reached just over a week ago. For Bitcoin, a hawkish, a hawkish message emphasizing inflation risks could pressure risk assets, potentially dragging the cryptocurrency back towards the 110,000 level. A more dovish tone, however, could revive hopes for an interest rate cut as soon as September, offering support for digital assets. And finally we’re going to look at oil. Prices are stable today, but hopes for an imminent peace deal between Russia and Ukraine have dimmed, putting prices on track for their first weekly gain in three weeks. The three and a half year war continued this week as Russia launched an air attack near Ukraine’s border with the European Union on Thursday, while Ukraine said it hit a Russian oil refinery and critical pumping station. Remember, President Trump is trying to broker a peace deal between Russian President Vladimir Putin and his Ukrainian counterpart, Vladimir Zelensky. Oil prices were also supported by a larger than expected draw down from US crude stockpiles in the past week, indicating strong demand. But again, the events at Jackson Hole could impact oil prices as well. Lower interest rates can stimulate economic growth and increase oil demand, potentially boosting oil prices.
