Weekly Wrapup: Fed Tensions, Jackson Hole Anticipation, and Global Risk Repricing — 18–22 August 2025
1. Big Picture — Policy Intrigue and Market Crosscurrents
The week of 18–22 August was one of heightened anticipation and persistent political overhang, with investors caught between incoming U.S. data surprises, Fed political turbulence, and looming Jackson Hole speeches. Early in the week, the dollar softened as traders focused on the Alaska Trump–Putin summit rhetoric and fresh tariffs on steel and semiconductors. Midweek saw a modest rebound driven by resilient housing starts and firmer Treasury yields, while late week culminated in a sharp dollar surge as strong PMI readings reinforced the Fed’s hawkish tone.
2. U.S. Macro Pulse — Mixed but Leaning Hawkish
Retail Sales & Activity Data: July retail sales rose 0.5%, broadly matching forecasts, though prior data were revised higher. At the same time, industrial production fell –0.1%, exposing fragility beneath consumption resilience.
Housing: Housing starts jumped to 1.428M, well above expectations, while permits lagged at 1.354M. Multifamily construction carried the strength, yet sentiment remained weak.
PMIs: Flash August PMIs delivered a manufacturing surprise at 53.3 vs. 49.5 expected and services at 55.4, the highest since December. This re-energized Fed hawks.
Labor Market: Weekly jobless claims climbed to 235k, showing cooling momentum, yet the overall jobs picture remains robust.
3. Fed Dynamics and Political Pressure
Hawkish Rhetoric: Hammack and Schmid stressed sticky inflation and resilient labor markets require a “restrictive stance” for longer. Bostic, however, still sees one cut this year if conditions soften.
Powell at Jackson Hole: Markets braced for Powell’s keynote, expected to clarify whether the Fed leans toward gradual easing or sticks with inflation vigilance.
Political Intrigue: Trump openly pressured the Fed, calling for Governor Lisa Cook’s resignation amid mortgage-related allegations. The Justice Department confirmed a referral review, fueling political noise around central bank independence.
4. Geopolitical Landscape — Risks Mount
Ukraine: Trump hinted at “severe consequences” if Russia prolongs war, while U.S. officials emphasized no American ground troops would be deployed. NATO leaders reaffirmed Ukrainian support, and Russia derided exclusion from talks.
Tariffs: New levies were placed on steel, aluminum, machinery, and semiconductors, with Treasury projecting upward revisions to tariff revenues above $300B.
China: Beijing signaled yuan-backed stablecoin discussions and continued trade probes into EU goods.
Middle East: Russia escalated assaults, undercutting hopes for ceasefire, while Zelenskiy framed Moscow as unwilling to negotiate.
5. Currency Market Movements
Dollar Index (DXY): Began soft near its 55-DMA on tariff and geopolitical overhang, but finished the week at a one-week high, boosted by PMIs and yields.
EUR/USD:
Early week gains faded into a doji above 1.1630.
By Friday, broke below 1.1615 as rising U.S. yields weighed, settling down –0.28%.
GBP/USD: Pressured by UK inflation at 3.8% and services at 5%, cable slid under 1.3460. Fiscal sustainability worries compounded losses, with the pair ending near 1.3420.
USD/JPY: Held range early, testing 147.4–147.9, then surged above 148 on PMI-driven yield spikes.
Crosses: Commodity FX lagged; AUD/JPY and GBP/JPY fell below key averages midweek.
6. Commodities & Risk Sentiment
Gold: Consolidated in a bullish structure near $3,331, eyeing $3,370, but capped by stronger USD and yields.
Oil: Rebounded 1.1% on Russian crude supply disruptions after earlier losses on tariff-driven demand worries.
Copper: Slid on USD strength midweek but recovered slightly into the weekend, still reflecting tariff pass-through.
Equities:
Early week softness saw the S&P 500 drop 0.7% on tech-led declines.
By Friday, the index edged lower (–0.08%), reflecting defensive positioning ahead of Powell’s speech.
7. Key Risks Forward
Powell’s Jackson Hole Address: Tone could pivot markets — hawkish remarks fuel USD surge; dovish lean reopens cut bets.
UK Retail Sales (Aug 22): Expected at +0.9% MoM; strong print supports GBP.
Eurozone PMIs: Thursday’s services/manufacturing surveys may stabilize EUR if they beat.
Geopolitical Surprises: Any escalation in Ukraine or tariff reprisals could reintroduce volatility to commodities and FX.
8. Strategic Takeaways
FX: Trade EUR/USD between 1.16–1.17 but fade rallies; GBP/USD remains vulnerable until fiscal clarity improves.
Rates: Curve steepeners intact, but watch Powell’s rhetoric for front-end repricing.
Commodities: Gold remains haven bid; oil headline-sensitive; copper pressured by tariffs.
Equities: Tech leadership fragile; rotation to defensives likely if yields rise further.
Weekly Wrapup: Dollar Strength, Fed Intrigue, and Global Tensions Ahead of Jackson Hole — 18–22 August 2025
(Paraphrased companion article, ~1,030 words)
A. Recap of the Week
Markets entered the week in a fragile balance, buffeted by trade tariffs, central bank politics, and the shadow of Jackson Hole. The dollar started soft as geopolitical noise and steel/semiconductor tariffs dampened sentiment, regained ground midweek on robust housing starts, and finished higher after August PMI readings underscored Fed hawkishness.
B. Fed Policy: Between Hawkish Resolve and Political Strains
Officials like Hammack and Schmid reiterated inflation’s persistence, arguing restrictive policy must continue. Bostic’s lone call for one cut highlighted division. Meanwhile, Powell’s upcoming Jackson Hole speech loomed as the potential pivot point. Political pressure intensified as Trump called for Lisa Cook’s resignation while the Justice Department opened a review.
C. Global Macro & Trade Developments
Trump extended tariffs on industrial imports and reiterated Ukraine would determine any territorial swaps with Moscow. Treasury Secretary Bessent projected tariffs will exceed the $300B revenue forecast. China pursued yuan-backed digital currency ambitions and pressed ahead with EU trade probes. NATO reaffirmed Ukraine support, while Russia escalated its military push.
D. FX Markets — Shifts in Ranges
Dollar Index: Gained 0.32% on the week, breaking out late on PMI momentum.
Euro: Briefly rallied to 1.1715 but reversed to close near 1.1615 as yields rose.
Sterling: Fell under its 55-DMA after inflation accelerated to 3.8%, highlighting fiscal strain.
Yen: USD/JPY broke a lower-highs streak, powering above 148, aligned with higher Treasury yields.
E. Commodities and Broader Assets
Gold hovered above key support but was capped by yield strength. Oil bounced on Russian supply disruptions after tariff-driven weakness earlier. Copper struggled as import costs climbed. Equities rotated defensively, with the S&P 500 ending the week marginally lower.
F. Forward Risks
Powell’s Jackson Hole message will dominate near-term risk pricing.
UK retail sales could offset cable’s weakness if domestic demand surprises to the upside.
Eurozone PMIs are pivotal in shaping EUR recovery.
Russia–Ukraine developments remain the largest wildcard for commodities and FX.
G. Positioning Guidance
Currencies: Favor USD strength into Powell; fade EUR/USD rallies; GBP remains heavy until fiscal clarity.
Rates: Stay in curve steepeners; front-end volatility hinges on Powell’s tone.
Commodities: Gold resilient as hedge; oil vulnerable to war news; copper weighed by tariff spillovers.
Equities: Defensive bias ahead of Jackson Hole; hedge against renewed yield spikes.
