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

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

    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 22nd 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. 

     


    Ipek Ozkardeskaya

    Ipek Ozkardeskaya

    Ipek Ozkardeskaya provides market analysis on FX, leading market indices, individual stocks, oil, commodities, bonds and interest rates.
    She has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked in HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist in Swissquote Bank. She worked as Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.
    She is passionate about the interaction between the economy and financial markets. She has been observing and analyzing a wide variety of relationships between the economic fundamentals and market behaviour over the past decade. She has been privileged to live and to work in the world's most exciting financial hubs including Geneva, London and Shanghai.
    She has a Bachelor's Degree in Economics and a Master's Degree in Financial Engineering and Risk Management from the University of Lausanne (HEC Lausanne), Switzerland.


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