Federal Reserve, Leaked News

On Monday, global markets showed an atmosphere of "big events are coming":

The dollar rose, gold and U.S. Treasury bonds surged before retreating, and U.S. stocks stagnated near historical highs.

On the surface, the market's fluctuations were not significant, but structurally, there was a hint of "leakage": overall presenting a pattern of "dollar rising, everything else falling." This resembles the notion that everyone has received a tip ahead of time, adjusting their positions before Jackson Hole.

The most anticipated event this week will be Fed Chair Powell's speech at the Jackson Hole annual meeting on Friday, as Wall Street seems to have received a heads-up.

First, the market's expectation for a rate cut in September by the Fed has dropped to 80%, after reaching 100% last week.

Second, in the research reports we see, analysts almost all expect Powell to emit a "hawkish signal":

· HSBC's view: Powell may find it difficult to say anything too "dovish" now, as there is both inflation pressure and a slowdown in employment, creating a flavor similar to "stagflation." If he relaxes too much at this time, the risks grow larger.

· Bank of America's view: Powell has every reason to "stay put," maintaining caution at Jackson Hole, not wanting to be held hostage by the market.

· Citigroup indicated that its dollar positioning indicator has shifted from a slight short to neutral, suggesting that current investors show no clear net long or short bias.

Wall Street's change in perspective presents a good opportunity for Powell— even if he issues a hawkish signal, the market is unlikely to overreact— the market is starting to accept a more "hawkish" Federal Reserve. A more likely scenario is that the market will provide feedback ahead of his speech. The market is not waiting for surprises but rather digesting the risk of "potential disappointment."

From Powell's own perspective, after such a long period of caution, it is unlikely he will make a clear statement, but the labor market data will indeed impact him. He is more likely to use some vague yet profound expressions, allowing the market to guess for itself.