Market Analysis - 22/08/25

US Shares Drop Ahead of Jackson Hole – S&P down 0.4%

US stocks dropped in trading yesterday ahead of a key Fed update from Jerome Powell later today, as investor fears of hawkish comments drove markets lower. The Dow Jones lost 0.34% to 44,785, the S&P fell 0.40% to 6,370, and the Nasdaq dropped 0.34% to 21,100. Treasury yields pushed higher as other Fed members remained less dovish than market expectations, with the 2-year up 4.4 basis points to 3.791% and the benchmark 10-year up 3.7 basis points to 4.328%. The dollar also rallied well against the majors, with the DXY up 0.44% to 98.65. Oil prices also gained ground as traders priced in more lengthy peace talks for Ukraine, with Brent up 1.11% to $67.58 and WTI up 1.18% to $63.45 a barrel. Gold drifted lower towards recent support levels, down 0.29% to $3,338.71 an ounce.

Jackson Hole Update Pivotal for Markets

It could be a pivotal day for financial markets ahead, and from some of the moves that we have seen in the market approaching today’s update from Jackson Hole, many investors think the same way. The market has been pricing in a rate cut in September for some time now, and odds for a 25-basis-point reduction reached nearly 100% immediately after the latest Non-Farm Payrolls report and the accompanying revision of previous data. However, market pricing is now closer to 75% as traders have reviewed comments from Fed members and the minutes from the last meeting, and investors are concerned that Jerome Powell will adopt a much more hawkish tone later today, which could lead to increased market volatility. If he appears to endorse a September cut and at least another by the end of the year, then we could see further upside for equities; however, expect sharp corrections if he pushes back against the government and pulls back those rate cut expectations.

Jackson Hole in Focus Today for Markets

The macroeconomic event calendar is relatively light today; however, traders are aware that we could see the most volatile session of the week in the final hours of trading, with Jerome Powell due to deliver a key speech from the Fed’s symposium in Jackson Hole, Wyoming. There is little scheduled in the Asian session to move the dial for traders, although yen traders will pay close attention to the Japanese Core CPI number early in the session. It’s a similar story in the European session, with just German quarterly GDP data due out, and so most of the action is expected to occur once New York opens. The initial focus will be north of the border for Canadian Retail Sales (exp. +1.3% m/m) and Core Retail Sales (exp. +0.9% m/m) numbers, but it will soon shift south for the key update from Jerome Powell.