Fed chief Powell is making a speech today

Outlook

Fed chief Powell is making a speech today (along with a gaggle of other Feds) and some traders are sitting on the edge of their chairs. This is a little silly because Powell hardly ever leaks anything useful, although that’s what he did at Jackson Hole, so maybe.

Bloomberg reports a gigantic, record high amount trade in futures removing a bet on 50 bp next time out. Nobody is suggesting a leak and other reports say betting on 50 bp is higher today.

Today we get the usual Thursday jobless claims, durables, and the biggie, GDP and its personal consumption spending component, which pretty much gives us PCE inflation.  Last time out, Q2 GDP was given as 3.10%, while the most recent Atlanta Fed had 2.95 (from 3.0% the week before). We get a new Atlanta Fed GDPNow tomorrow. No surprises are likely here.

As for core PCE, the critical Fed benchmark, it is expected the same or nearly the same as last time, 3.2% in Aug, the same as July. This is not the 2% target but still the lowest in many months.

Tidbit: Bad news is piling up. On top of the Boeing strike, now the dockworkers may go out. Another hurricane is here. Harris is behind Trump in the latest Silver Bulletin calculation of electoral college voting.

Forecast

We searched high and low for a reason, any excuse, for the dollar to turn around and thrive yesterday. It didn’t seem to be data-driven and it was universal, not just one or two currencies—even currencies like the peso. It’s true that yields are up a bit, but that’s not new.

We doubt this is going to be a true correction, but the move was enough to switch signals in the trading reports, which has less lag than the charts in this Briefing. Granted, there is still talk of another 50 bp rate cut in October, but that would take the dollar the other way.

In the end, we think it might be as simple as month-end and quarter-end position adjustment, and nothing to do with sentiment, after all. Or it could be PCE inflation, to be deduced today, which “should” take the wind out of Big Cut sails. Choppiness lies ahead.

This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes.

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