Labor Market 2025: Navigating the Era of Strategic Stagnation

The Psychology Behind the Freeze

Signs of a Cooling Market

The U.K. Mirrors the U.S. Shift

Balancing Labor Supply and Demand

Source: CNBC

Powell’s Subtle Signal Sparks Market Frenzy as Fed Shifts Focus

Markets React Swiftly to Powell’s Subtle Pivot

Policy Uncertainty Amid Political and Economic Shocks

Eyes on Nvidia and Inflation Data This Week

Source: CNBC

Trump’s Pressure on the Fed Sparks Global Alarm Over Central Bank Independence

Independence Is “Not to Be Taken for Granted”

Financial Market Calm Masks Institutional Risk

A “Bad Example” for the World

The Global Stakes: Credibility, Inflation, and Stability

Source: Reuters

PBOC Reinforces Liquidity to Curb Bond Selloff and Support Growth

Stabilizing the Bond Market and Funding Conditions

Avoiding Aggressive Easing For Now

Risks of Liquidity Drain from Stock Rally

Short-Term Relief, Long-Term Balancing Act

Source: Bloomberg

It was an interesting trading week for financial markets last week, with the major update coming in the final session as Fed Chair Jerome Powell all but confirmed a September rate cut in his speech from Jackson Hole.Markets closed the week in a positive fashion on Friday, and most investors are expecting that momentum to carry into the early sessions of this week.It is a relatively quiet week on the macroeconomic calendar; however, there are a few key updates that should see some volatility around them, culminating in the Fed’s favoured inflation indicator on Friday.

Here is our usual day-by-day breakdown of the major risk events this week:

It could be an interesting start to the week for financial markets as key central bank heavy hitters are still in Jackson Hole for the symposium over the weekend, and we could see some sharp moves on the open in Asia, especially in currency markets. Kiwi markets will then be in focus early in the day with the latest Retail Sales numbers due out. Liquidity will be lower than usual in the European session with the UK on holiday, and we could see some moves in the euro with the German IFO Business Climate data due out. The New York session is relatively light on data updates, with just the New Home Sales data due out.

The first two sessions of the day on Tuesday are light in terms of calendar events; however, things should heat up once New York opens. US Durable Goods data is due out early in the day, and this is followed a couple of hours later by the CB Consumer Confidence numbers and the Richmond Manufacturing Index data. The focus will move to Canadian markets later in the session with Bank of Canada Governor Tiff Macklem due to speak.

Australian markets will be in focus for traders in the Asian session with key CPI data due out early in the day. There is very little on the calendar in the latter two sessions; however, the weekly US Crude Oil Inventory numbers are due out in the New York session, and we do hear from the Fed’s Thomas Barkin later in the day.

There is nothing of note on the calendar in the Asian session on Thursday, but the focus will be on Swiss markets early in the London session with the quarterly GDP numbers due out. The New York session again looks likely to be the busiest, with US quarterly Prelim GDP data due out alongside the weekly Unemployment Claims numbers early in the day. Pending Home Sales data is due out later, and we also hear from the FOMC’s Christopher Waller just after the close.

Inflation numbers are in focus across the sessions on Friday. The focus in the Asian day will be on Japanese markets with the key Tokyo CPI numbers due out. The London session sees Prelim CPI data out from Germany, France, Italy, and Spain. However, the main event of the day—and probably the week—is once again scheduled for the final session. The US Core PCE Price Index data is due out early in the session, and traders will be looking for this to confirm a September rate cut. Canadian GDP numbers are out at the same time, and we have revised University of Michigan data later in the session, but expect the PCE numbers to dominate sentiment into the weekend.

Source: IC Markets

Energy – India’s secondary tariffs come into effect this week

Oil prices managed to finish last week higher, settling up almost 2.9% higher as enthusiasm over a potential Russia-Ukraine ceasefire wanes. Uncertainty prevails as US President Trump once again threatens to impose tougher sanctions on Russia unless there’s a deal to end the war. Trump said there needs to be more clarity within roughly two weeks. However, the market may be reluctant to read too much into this latest threat, given the lack of action taken by the US administration against Russia following the Trump-Putin summit.

In the near term, we may see the oil market benefit following Fed Chair Jerome Powell’s Jackson Hole speech, which was largely dovish and provided a boost to most risk assets. The market is pricing in more than an 85% probability that the Fed cuts interest rates by 25bp in September, up from around 72% ahead of Powell’s speech.

It's looking increasingly likely that secondary tariffs against India for their purchases of Russian oil will go ahead on 27 August. There appears to be little progress in trade talks between India and the US, since the US announced the tariff earlier in the month. Furthermore, Indian refiners have been showing increased interest in Russian oil, after state refiners initially paused purchases until there is clarity from the government. If India continues to buy Russian oil despite the 25% secondary tariff, it does little to change the market outlook. Instead, it only confirms the bearish outlook for oil prices.

Speculators continue to reduce their net long in ICE Brent amid a bearish outlook. Speculators sold 23,852 lots over the last reporting week to leave them with a net long of 182,695 lots as of last Tuesday. The move was driven predominantly by longs liquidating. Meanwhile, speculators also sold 19,578 lots in NYMEX WTI, leaving them with a net long of 29,686 lots. This is the smallest position held in WTI since October 2008.

Fading optimism over a Russia-Ukraine peace is providing support for European gas prices. At the same time, concerns over flows to Europe amid upcoming Norwegian maintenance will also provide support to the market. Front-month Title Transfer Facility (TTF) futures managed to settle more than 8% higher over the week. EU gas storage is close to 76% full, below the 91% seen at the same stage last year and lower than the 83% 5-year average.

US natural gas has been more bearish, with Henry Hub down 7.5% over the last week and settling at its lowest level since October 2024. This is despite last week’s storage build coming in below average. However, overall storage remains 5.8% above the 5-year average, while we are moving towards a period where we expect to see reduced cooling demand. This is allowing for larger storage builds ahead of the 2025/2026 winter.

Metals – Gold jumps as Powell signals rate cuts

Gold jumped last Friday as the dollar and bond yields fell after Federal Reserve Chair Jerome Powell suggested an interest rate cut in September, pointing to increasing labour market risks despite persistent inflation concerns. Traders added to bets the Fed will cut rates next month. With US rate cut bets intensifying after Powell’s speech, gold could be poised for another fresh record high.

World Steel Association data shows that global steel production fell 1.3% year on year to 150.1mt in July, as lower output in China, Japan, Russia, and Germany offset higher output from India and the US. Cumulative global steel output fell 1.9% YoY to 1,086.2mt over the first seven months of the year. Chinese steel production fell 4% YoY for a second straight month to 79.7mt last month amid government efforts to gain control over supply. Over the first seven months of the year, output fell 3.1% YoY to 594.5mt. In the EU, crude steel production dropped 7% YoY to 10.2mt with Germany (-13.7% YoY) dominating the declines.

Source: ING