Warsh's Hawkish Stance Sets Stage for Crucial Market Events
Federal Reserve Chair Kevin Warsh's hawkish speech at Jackson Hole sent shockwaves through global financial markets, pushing the probability of a September rate hike to nearly 60% and causing the dollar index to rally sharply. The S&P 500 closed lower on Friday, with stocks responding negatively to the rate-hike repricing. Gold prices plummeted more than 3% in a single day, with spot silver falling by 3.82% for the week.
Looking ahead to the new week, market focus will turn to the U.S. August nonfarm payrolls report and the G20 Finance Ministers and Central Bank Governors Meeting. The Reserve Bank of New Zealand and the Bank of Canada will also announce their rate decisions, with markets expecting a rate hike from the RBNZ and no change from the BoC.
The jobs data release on Friday's U.S. August employment report will be critical in testing the policy path following Warsh's hawkish turn. A Reuters survey predicts that nonfarm payrolls will increase by 58,000, with the unemployment rate holding at 4.1% and average hourly earnings rising 0.2% month-over-month.