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In the US, all eyes will be on the Federal Reserve in this week – with both the August FOMC meeting minutes due Wednesday and the annual economic symposium at Jackson Hole on Friday, points out the research team at ING.

Key Quotes

“For global investors is whether the Fed acknowledges not only the recent market volatility but also the fact that its policy signals may be partly behind the deterioration in global risk sentiment. Under a Yellen Fed, we were pretty sure that these market conditions would have kept the US central bank in wait-and-see mode. However, all eyes will be on new Fed Chair Powell to see whether he formally adopts an ‘America First’ monetary policy approach.”

“A Yellen-esque Powell would be the pretty positive outcome for emerging market assets in the current market environment. Elsewhere, Jackson Hole may well focus on the Fed’s long-run policy framework – not least the debate over how much to shrink the central bank’s balance sheet by and what the future short-term policy instrument will be. However, we doubt any of this has any noticeable short-term impact on the US yield curve which continues to be dominated by a flattening theme.”

“It’s also worth keeping one eye on some of the survey data out of the US – leading activity indicators have been coming off the boil over the past month including a sharp drop in the ISM, Philly Fed index and Michigan consumer confidence. If there wasn’t this degree of geopolitical noise in the background, one thing we’d be more confident about is our view that the cyclical USD macro dynamics have peaked in 2Q18.”