Markets Adjust Expectations Ahead of Fed Decision
The past week saw markets adjust their expectations ahead of the Fed's Jackson Hole symposium. The US PCE price index came in slightly above forecasts, at 3.7%, driven by solid demand metrics and increasing consumption. However, the core rate remained unchanged at 3.3%. This lack of significant new pressure on the Fed to raise rates kept market expectations largely unchanged.
The dollar made a recovery later in the week after US PCE data showed inflationary pressure remained, while gold fell as low as $4,625 by Friday due to a rebounding dollar and falling bond prices. The Canadian dollar was among the worst performers following the collapse of US-Canadian trade talks on the weekend.
Looking ahead, this week is expected to be busy, starting with the Eurozone CPI, followed by the BOC's rate decision, and crucial US jobs data by Friday. Investors will also pay attention to the BOC's commentary for clues about what the Fed might do a week later. A more hawkish statement could send the USDCAD towards its recent multi-month low.