Markets remain in wait-and-see mode on Thursday, after the Fed minutes told us nothing we didn't already know despite briefly being responsible for the, now very well known, recession indicator flashing red for a second time.
The minutes on Wednesday highlighted just how difficult the current situation is, with the central bank deeply divided on the correct course of action, although there was a broad agreement that the July rate cut was a "mid-cycle adjustment" rather than the start of an easing cycle. Of course, one doesn't stop the other becoming true and could develop that way.
The two key takeaway from the minutes as far as I'm concerned is that they are very outdated already - as we already thought - and investors are in no mood to tolerate the Fed dragging its feet. Which begs the question, how will Powell respond in his speech on Friday? Investors are effectively trying to force the Fed into submission and the central bank is losing, if they're going to fight back, now is the time. But it could get messy.
Investors refuse to accept that more rate cuts aren't coming and have priced in at least two more this year, with one at each remaining meeting being a coin toss. If Powell disappoints on Friday, I will be shocked if the recession indicator doesn't flash red again, a punishment from the markets for the Fed not doing as its told. So does Powell concede defeat, or accept responsibility for recession fears mount, even if the cause of it don't lie with him?
Gold waiting patiently
Gold has been waiting patiently for the Jackson Hole event all week, hovering around $1,500 to see whether bulls can muster up the energy for one more charge higher. That depends on Powell and whether he's willing to accept defeat and signal more easing, which could soften the dollar and reinvigorate the gold rally.
Further stubbornness from the Fed Chairman - and the rest of the committee, it should be said - could strengthen the dollar and pull on gold prices, possibly inducing further profit taking and putting $1,480 under severe pressure. A break of this may suggest we're in correction territory.
Oil looks prepared for a nasty drop
Oil looks in limbo at the moment. It's been steadily rising over the last couple of weeks but not in any convincing way, which suggests traders are waiting around for the next sell-off. Brent has now steadied itself around the $61-62 area and looks reluctant to go much further without good reason and that's unlikely to come from trade war news.
A risk rally at the end of the week may get it moving again but that hangs on Powell, really. This looks like a market which is waiting for bad news, at which point it could plunge lower once again. Of course, that may not come but as long as it hangs around these levels, it looks vulnerable to a nasty drop.
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