Much like on Wednesday, the markets are opting for caution this Thursday morning, eagerly anticipating this afternoon’s Jackson Hole appearance from Jerome Powell.
The Federal Reserve chief is set to speak at 2.10pm UK time, and will almost certainly dictate whether or not the US markets can hold onto the significant growth they have posted in August.
Investors are looking for confirmation that the Fed is set to soften its stance on the 2% inflation target – a target more often than not missed since the financial crisis – following the conclusion of its long-term monetary policy framework review. Reports suggest the FOMC will now aim for an average of 2%, allowing the central bank to overshoot that target to counter months where the CPI reading is lower than desired.
Something that could inform the market’s reaction is how much detail on the review – and the central bank’s future path – is announced today, and how much is saved for the Federal Reserve’s next official meeting in September.
Before that investors will get more evidence as to why the Fed finds itself in the situation it does, with the latest US Q2 GDP and jobless claims readings. The former is forecast to be revised ever so slightly, from -32.9% to -32.5%, while the latter is expected to come in dead on 1 million.
But all of this comes after lunch. At the moment the European indices don’t have much to work with, leaving the FTSE and CAC down 0.3% apiece, and the DAX flat just below 13200. The Dow Jones is also keeping its cards close to its chest, the futures pointing to a 0.1% fall post-open – that, of course, will change given the timing of Powell’s appearance.
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