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[Quick Facts]

1. Powell is unlikely to release dovish signals at the Jackson Hole meeting.

2. Germany's July PPI declines MoM due to lower energy prices.

3. The risk of a U.S. government shutdown in October intensifies.

4. European gas faces a big test this week in Australia talks.

[News Details]

Powell is unlikely to release dovish signals at the Jackson Hole meeting

This Jackson Hole meeting will be held against the fragile backdrop that the U.S. is the best performer of all the major economies, but two-thirds of the 602 U.S. respondents in the latest survey said the Fed has yet to curb inflation.

Fed officials including Jerome Powell can't be sure they've raised interest rates enough to keep prices in check. They are not even sure how much longer they will continue with tightening, which is increasingly becoming a major issue in financial markets.

Germany's July PPI declines MoM due to lower energy prices

Germany's July PPI data was well below market expectations. Most of the decline was driven by energy prices which fell by 2.5% compared to June. Producer prices also dropped by 0.4%. This should eventually trickle down to consumer inflation.

The risk of a U.S. government shutdown in October intensifies

The Freedom Caucus of the U.S. House of Representatives on Monday proposed additional conditions for cutting government spending and funding Ukraine as a precondition for their support for a stopgap spending bill. This will face strong opposition from the Democratic Party, which will also put the stopgap spending bill at risk of suspending and lead to a shutdown of the U.S. government on October 1st.

Leaders of both the Donkey and Elephant parties have already said that a stopgap spending bill is necessary to avoid a partial government shutdown at the end of the fiscal year on September 30th. These conservative lawmakers are at odds with Speaker Kevin McCarthy, but they have enormous influence in the House of Representatives where Republicans hold only a razor-thin majority. They will oppose such a "no-strings-attached" bill if it continues the current spending levels and policies that conservatives oppose. And they will oppose any separate appropriations that could be used as a "blank check" to provide support to Ukraine.

European gas faces a big test this week in Australia talks

European gas futures have surged more than 35% this month, and gas prices could soar further if talks between Australia's Woodside Energy Group and its liquefied natural gas (LNG) workers fail to reach an agreement. If a pay deal is reached and the threat of a strike is averted, the European gas market could collapse. That's because, with Europe still recovering from last year's energy crisis, traders remain extremely nervous, so even a relatively small change in the market can sometimes cause an overreaction.

Prolonged disruption to Australia's LNG exports could affect about 10% of global supply if a general strike goes ahead, intensifying competition for alternative cargoes. However, if the strike is averted, the European gas market will return to a state of high stocks, meaning there is a risk of oversupply ahead of the winter season.

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