• Stocks post strong weekly gains as Fed’s first rate cut nears
• Markets are gradually preparing for the Jackson Hole meeting
• Euro/dollar is trading within a critical resistance area
• Gold in demand as geopolitics makes headlines

Stocks rally, enjoy the mixed US data

Markets continue to recover after the recent slump, and U.S. stocks ended last week with strong gains. More specifically, they led the rally with a weekly increase of 5.4%, as the three major U.S. stock indexes simultaneously posted weekly gains of more than 2% for the first time since the period from December 11 to 15, 2023.

Last week’s mixed US data may have played a key role in improving market sentiment. The US report for July surprised somewhat on the downside and reinforced expectations of a Fed rate cut in September.

Exaggerated calls for emergency cuts or a 50 basis point rate cut next month have waned as equity markets have improved, but there are still some diehard critics calling for a strong move if nonfarm payrolls figures due to be released in early September significantly disappoint.

Friday’s report surprised on the upside, but the market continues to ignore the strong data and instead focuses on data that point to an economic slowdown, such as last week’s weak housing data and the fact that the key survey remains at low levels.

Markets prepare for a dovish meeting in Jackson Hole

The focus is gradually turning to the August 22-24 meeting. While most Fed members were sidelined during the recent market meltdown, they returned late last week to set the stage for Fed Chair Powell’s speech on Friday.

The tone of their appearances was that the time is near for the first rate cut of the easing cycle. We’re sure to hear more from Fed members ahead of the symposium, as Fed Chair Waller, a well-known hawk and 2024 voter, will be on the call later today.

In the meantime, preliminary manufacturing and services PMI surveys for August could be important for market sentiment. The index remains on the decline, underperforming its main rivals in August while continuing to trend higher despite mediocre-at-best data from the Eurozone.

Another round of weak Eurozone data on Thursday could finally allow the dollar to recoup some of its recent losses, especially as the euro/dollar rate is now trading within the key 1.1032-1.1095 zone. This region has clearly been a problem for Euro bulls since 2023, as there have been four occasions in the past 18 months when a move above this zone failed spectacularly.

Gold hits new high, Bitcoin rally stalls

Demand for gold remains strong, pushing the precious metal to a new record while it has once again fallen below the $60,000 mark. The situation in the conflict between Israel, Iran and Hamas remains uncertain, and Iran is still expected to make a show of force in response to the recent assassination of Hamas’ political leader. Negotiations for a ceasefire have stalled again as US Secretary of State Antony Blinken visits the region.

Meanwhile, Ukraine’s attempt to end the conflict between Russia and Ukraine by launching an offensive on Russian territory is gaining momentum. However, the possible direct involvement of Belarus and the increased likelihood of an asymmetric response from the Russian side may deter investors in the future.