Friday preview: Powell speech eyed as Jackson Hole goes virtual

The main focus on Friday will be a speech by US Federal Reserve chair Jerome Powell at the Jackson Hole symposium in Wyoming, as investors watch out for any fresh clues on tapering.

Neil Wilson, head of markets at Markets.com, said: "All eyes are on Fed chair Jay Powell on Friday, though markets seem relatively comfortable that either course he takes will ultimately not create a taper tantrum - we will see.

"Minutes from the last FOMC meeting clearly stated that most participants expect to be tapering this year. This does not mean the Fed needs to send a clear message to the market this week. Powell can keep some dry powder and wait for the September FOMC meeting at least. The last couple of weeks have shown growth momentum fading and US covid cases spiking, but it’s also showing inflation is proving to be sticky.

"If anything what we are seeing is just how difficult it will be to exit such a huge policy response (to the pandemic) without serious repercussions - be they inflation scarring, financial stability, financial bubbles or whatever. South Korea lit the torch as the country’s central bank raised rates overnight from 0.5% to 0.75%."

Oanda analyst Craig Erlam said he wouldn’t be surprised if Powell’s speech "turns out to be one big anti-climax", with the Fed chair saying very little of note at the virtual symposium and instead insisting that the data will dictate any decisions in the upcoming meetings.

"In other words, the chairman may simply kick the can down the road and buy the central bank a few more weeks," he said.

"Rather sensible in the grand scheme of things. But it may not do much for these markets unless it's accompanied by something more substantial."

The UK corporate calendar is pretty much empty, with most market participants likely to be away from their desks as we head towards the Bank Holiday weekend.

On the macro front, there are some US data points due, with personal income and consumption figures out at 1330 BST, along with wholesale inventories and the goods trade balance. The Michigan consumer sentiment index is due at 1500 BST.

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U. of Michigan Confidence (US) (15:00)

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