Jackson Hole arrives after a volatile week for macro conditions

Despite a few weeks of summer-esque trading, Covid developments and shifting expectations of Fed policy have reignited volatility in markets this week. The largest repricing occurred on Thursday, where investors digested louder calls by FOMC members for tapering this year in the July meeting minutes along with a UK study that found vaccines are less effective against the Delta variant after 90-days. The combination of the two events resulted in the dollar DXY index rising to a fresh 9-month high, notching gains in excess of 1.2% over the course of the week in the process. With a tentative macroeconomic backdrop, next week’s data is likely to have a larger market impact than usual, especially with the quantity of preliminary PMI releases for August. Meanwhile Covid-19 developments and Fed policy will remain at the forefront of investors’ minds. On the last point, the Fed’s annual Jackson Hole symposium should provide markets with a bit more clarity as to its tapering timeline, although we don’t expect a material policy announcement at the event.

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