Somehow the vital connection is made

Market Update: 28 August 2020

It’s pretty fair to say that despite improvements in European data over the week, the markets were pretty much in autopilot until Jackson Hole last night. As previously mentioned, it doesn’t happen too often the Fed Chair sounds out new policy, so it can be market moving.

Jerome Powell didn’t disappoint in what was widely heralded … as expected. The inflation band has been given some elasticity – which can in a way act as a buffer to over-cutting and over-hiking. The downside is it also tells us they might be more relaxed than further easing measures, but when we see better times, they’ll be less jittery to hike.

What does that mean to us? well besides the US 10yr moving higher in yield because the market looked at the off-chance the Fed would tinker with the curve, again they didn’t.

The short-term correlation breaks have been consistent of recent and despite it all AUD rallied and remains in trend. Interestingly, despite a higher VIX, S&P closed modestly up and so again. breaks the basic expectations of correlation.

Thematically, the argument between the Federal and State of Victoria on Chinese infrastructure investment was destined to upset China – lo and behold, more bans on Australian Beef announced today. It didn’t knock the sails out of AUD’s wind, but ASX was less happy.

Not too much to inspire tonight in data… so nothing else to do but enjoy the weekend!

Connection by Elastica

Sources: Bloomberg

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