Jackson Hole & BRICS: Fed's Hawkish Stance and Global Currency Shifts

Jackson Hole & BRICS 

This week, investors will have their eyes and ears on Federal Reserve (Fed) Chair Jerome Powell's Jackson Hole speech due Friday. The chances are that he will keep his hawkish stance despite falling inflation. The minutes from the latest FOMC meeting highlighted 'significant upside risks' on inflation. This being said, the fear of decidedly hawkish Fed is already priced in, and if there is no more hawkish surprise from this week's Jackson Hole meeting, tensions among investors could ease by next week, and give markets some breathing room. 

Elsewhere, BRICS summit will take place this week between 22^nd and 24rd of August. What's interesting with this summit is 1. A month ago, South Africa said that 40 more nations wanted to join BRICS, and 23 of them formally applied to become members including Saudi Arabia, Iran, and UAE. 2. They would like to drop US dollar and eventually start using member-state currencies to settle their trade terms between them, and 3. There are rumours that the BRICS countries could even issue a gold-based currency to replace the US dollar, as many nations are willing to free themselves from the risks of holding and using US dollars. Note that the rumours of a gold-based BRICS currency didn't necessarily boost appetite in gold lately. The price of an ounce is, on the contrary, mainly driven by US yields. The rising US yields weigh on gold appetite by increasing the opportunity cost of holding the non-interest-bearing gold. The yellow metal slipped below its 200-DMA last week for the first time since December. A downside correction in the US yields could slow the selloff and encourage a minor positive correction but given the Fed's undoubtful hawkish stance on its rate policy, gold bulls may need BRICS to say something about their currency plans. But I am afraid the latter might not be on the agenda of this week's summit.