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Citi
Several factors contributed to risk aversion over a session of slightly above average volumes Thursday. Most topical were attacks in Afghanistan that prompted a knee-jerk tug in risk appetite, and set a somber tone for sentiment throughout the remainder of the trading period.
Initial offloading in risk assets coincided with reports of attacks in Afghanistan, and gradually picked up steam as the session progressed. With that being said, it’s important to acknowledge a low threshold for profit taking. Markets like equities had already begun to lose steam after carving new all-time highs. Consequently, investors should be more prone to trimming holdings especially ahead of Powell’s Friday appearance at Jackson Hole.
Final positioning adjustments ahead of Friday’s Jackson Hole are also likely at play. CitiFX Strategy looks for Chair Powell to imply a taper ‘sometime’ in Q4, but retain optionality on when the Fed could move. Note that Powell is expected to take the stage at 15:00 BST.
Credit Agricole
Investors were playing the waiting game in Asia ahead of FOMC Chairman Jerome Powell’s address at the Jackson Hole Symposium. A small majority of Asian bourses were trading lower and S&P500 futures higher at the time of writing.G10 FX saw a range-bound Asian session with the JPY, CHF and SEK modest outperformers and the NZD a modest underperformer on the back of an extension to NZ’s lockdown by another four days.
The rebound in risk that we’ve had since the start of the week has lost some impetus of late with some cautiousness returning to the markets ahead of Powell's Jackson Hole speech at 10AM EST on Friday. Indeed, it seems that the market consensus already is for the Fed Chair Powell to stick to the FOMC’s patient language on QE taper. This may mean that the main risks ahead of Friday would be a more hawkish Fed message.
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