Powell's speech points towards September rate cut

Fed Chair Jerome Powell’s speech at the annual Jackson Hole symposium struck a dovish tone and has made a rate cut from the Federal Reserve at the September FOMC meeting more likely. He spoke of a ‘shifting balance of risks’ which ‘may warrant adjusting our policy stance’, suggesting that the recent weak jobs report might be more in focus than the inflation risk, though he also noted that they remained ‘tilted to the upside’ and that it was a ‘challenging situation’ overall. Given that there remain risks in both directions, Powell diminished the likelihood of outsize moves lower from the Fed, noting that ‘the stability of the unemployment rate and other labour market measures allows us to proceed carefully.’

Oman welcomed 1.1mn international visitors over the first half of the year, a new record for the tourism industry and representing y/y growth of 9.2%. Occupancy rates stood at 54.7% for the period, compared with 47.8% in H1 2024. Visitors from Europe accounted for the bulk of the guests at 40%, and were up 20.1% y/y.

Tourist arrivals in Turkey stood at 7.0mn in July, down 5.0% y/y. This followed a 1.5% drop in June and was the third month running that numbers were down on those in 2024. The biggest source market for visitors remained Germany, followed by Russia, the UK, Poland and the Netherlands. Over the year-to-date, numbers are down 2.1% y/y.

Today’s Economic Data and Events

16:30 US durable goods orders, % m/m, July. Forecast: -3.9%

18:00 US conference board consumer confidence, August. Forecast: 96.5

Fixed Income

• US Treasury yields rallied sharply following Jerome Powell’s dovish-leaning speech on Friday, with yields falling across the curve, especially at the more rate-sensitive short end with the 2-yr ending the day 10bps lower at 3.6963%, leading to a 5bps drop over the week. The 10yr fell 7bps on Friday, and 6bps over the week.
• Central banks setting policy this week include the Central Bank of Egypt, South Korea, Hungary, and Philippines.

FX

• The dollar index sold off on Friday as expectations for a September rate cut from the Fed heightened following Jerome Powell’s speech. It closed down 0.9% against its basket of peer currencies on the day, though given gains made earlier in the week its w/w decline was just 0.1%.
• Gains against the dollar were broad based on Friday. JPY strengthened 1.0% on the day, bolstered additionally by a CPI inflation print which indicated that price pressures remained salient. It gained 0.2% over the week to close at 146.94.

• EUR also added 1.0% on Friday to close at 1.1718, up 0.1% w/w. GBP was up 0.8% on Friday to 1.3525, though it remained down 0.2% on the week.

Equities

• US equity markets received a boost on Friday from Powell’s Jackson Hole speech, with the rate-sensitive tech-heavy NASDAQ closing up 1.9% on the day, though this was insufficient to offset losses earlier in the week and it still ended Friday 0.6% lower than a week earlier. The S&P 500 was up 1.5% on Friday, for a 0.3% gain on the week.
• Locally, the DFM closed down 0.4% w/w while the ADX ended the week 0.9% lower. Saudi Arabia’s Tadawul also ended the week 0.9% lower.

Commodities

• Oil prices picked up on Friday on the back of a general bullish market mood. Brent futures rose for the first time in seven sessions, adding 0.2% on the day to close at USD 66.59/b, though this was still 4.4% lower on the week. WTI had a somewhat stronger run last week and ended Friday up 0.2% on the day to USD 63.7/b, up 1.4% from a week earlier.