Hot PPI Clouds Fed Outlook: Jackson Hole in Focus |

Market Sentiment Overview

Mixed inflation signals have injected fresh uncertainty into the Fed’s policy outlook as markets await Powell’s speech at Jackson Hole on Friday. While the July CPI held steady at 2.7%, a scorching PPI reading of 3.3% (up from 2.4% previously) reignited tariff-inflation fears. September rate cut odds remain near 90%, but hot wholesale prices cloud the path ahead. The US-China trade truce was extended another 90 days, while the Trump-Putin Alaska summit concluded with limited concrete outcomes. All eyes now turn to central bank communications at Jackson Hole.

Currencies

USD Index: Political Pressure Mounts (97.80)

Current Trend: Bearish Market Sentiment: Uncertain

The US Dollar Index retreated for the second consecutive week, falling below 98.00 as political pressures intensify around Fed independence. Trump’s dismissal of the BLS commissioner and renewed attacks on Powell have raised “Erdoganization” concerns. Treasury Secretary Bessent called for a “series of rate cuts,” potentially starting with 50bps in September. Fed Fund Futures now price 92.7% probability of a 25bps cut, with markets no longer questioning if but by how much. Political appointee Christopher Waller has risen to the top of Trump’s shortlist to replace Powell, signaling potential policy shifts ahead.

EUR/USD: Extends Rally to 1.1730 (1.1730)

Current Trend: Bullish Market Sentiment: Positive

EUR/USD posted its second consecutive weekly advance, settling above 1.1700 despite mixed regional data. The pair surged on broad Dollar weakness, though German ZEW Economic Sentiment fell sharply to 34.7 from 52.7. Technical outlook remains bullish with the pair eyeing the year’s peak at 1.1830. ECB President Lagarde will speak at Jackson Hole on Saturday, potentially providing fresh policy cues. Key resistance at 1.1805, support at 1.1596..

GBP/USD: Near 1.3600 Despite BoE Cut (1.3580)

Current Trend: Bullish Market Sentiment: Cautious Optimism

Sterling clinched its second consecutive week of gains, approaching the 1.3600 barrier despite the Bank of England’s knife-edge decision to cut rates to 4.00%. The 5-4 vote suggests policy divergence concerns, while hawkish rhetoric about inflation peaking at 4% (vs 3.7% forecast) supports the Pound. UK inflation data on Wednesday will be crucial, with markets pricing only modest further easing. Technical setup shows potential for further gains toward 1.3788 (2025 high).

Stocks

S&P 500: New Highs Amid Fed Cut Bets (5,950)

Current Trend: Bullish (But Cautious) Market Sentiment: Optimistic

Major indices delivered back-to-back weekly gains, with the S&P 500 rising 0.94% and hitting new all-time highs on Tuesday and Wednesday following in-line CPI data. The Dow outperformed with a 1.74% weekly gain. However, Thursday’s hot PPI reading (3.3% vs 2.4% expected) dented sentiment and clouded the Fed outlook. Powell’s Jackson Hole speech on Friday emerges as the week’s key catalyst – dovish tones could broaden the rally, while hawkish commentary might trigger sharp corrections in growth and rate-sensitive sectors.

Commodities

Gold: Range-Bound Below $3,350 (3,340)

Current Trend: Neutral Market Sentiment: Mixed

Gold failed to build on recent gains, trading sideways below $3,350 as markets digested mixed US inflation data. The precious metal found support after Trump’s 90-day tariff extension announcement, but was pressured by hot PPI readings. Easing geopolitical tensions following the Trump-Putin summit also reduced safe-haven demand. The metal awaits Powell’s Jackson Hole speech for directional cues, with technical indicators suggesting a potential breakout pending.

WTI Crude Oil: Alaska Summit No Effect (62.50)

Current Trend: Bearish Market Sentiment: Negative

WTI crude continued its downward trajectory, hovering above $62.00 despite the high-profile Trump-Putin Alaska summit. The meeting’s limited concrete outcomes failed to impact oil markets, reinforcing views that supply remains ample globally. Steady global production and comfortable inventory levels continue to pressure prices. Technical outlook suggests potential tests of $61.50-$62.00 support zone, with speculative range for the week at $59.50-$65.10.

Central Bank Calendar & Key Events (August 18-22, 2025)

Jackson Hole Symposium Highlights

• Thursday: ECB’s Lagarde speaks
• Friday: Fed Chair Powell’s keynote speech (main event)
• Saturday: Additional central bank officials

Major Economic Releases

• Tuesday: Canada CPI for July
• Wednesday: UK Inflation Data for July, FOMC Minutes, China PBoC Rate Decision, RBNZ Rate Decision (3.00% cut expected)
• Thursday: Global PMI Flash Readings (US, Eurozone, UK), Philadelphia Fed Manufacturing Survey, US Initial Jobless Claims
• Friday: Japan CPI for July, UK Retail Sales, US Existing Home Sales

>Central Bank Decisions

• Wednesday: PBoC Rate Decision (3.00%-3.50% expected), RBNZ Rate Decision (25bps cut to 3.00% widely expected), Bank of Indonesia (5.25% hold expected), Riksbank (2.00% hold expected)

Week Ahead Outlook

Jackson Hole takes center stage with Powell’s Friday speech as the marquee event. Markets will parse every word for clues on September policy direction amid conflicting inflation signals. The RBNZ is widely expected to deliver a 25bps cut on Wednesday, but forward guidance will be key for NZD direction. UK inflation data on Wednesday could determine whether the BoE’s hawkish inflation forecasts materialize.

Thursday’s global PMI flash readings will provide crucial insights into economic momentum across major economies, particularly important given recent mixed signals. Any significant deviation from expectations could influence central bank thinking ahead of the September meetings.

The Trump–Putin summit aftermath continues to unfold with potential implications for energy markets and geopolitical risk premiums, though immediate market impact appears limited.

Risk management remains essential given elevated uncertainty around the Fed policy path and potential volatility from Jackson Hole speeches. The divergence between consumer and producer price inflation adds complexity to the Fed’s decision-making process.

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