by Adam Button
Fed Chair Jerome Powell's Jackson Hole speech was scheduled for Friday but it came with a twist—the live conference was moved to a virtual format. Some speculate the shift may be bullish/bearish for indices based on the lack of importance/weight the symposium will have on any policy guidance. Less than a month ago, Powell was brushing off the potential impacts of the Delta wave on the economy, but with the shift of a Fed conference, he gets a first-hand view of how efforts to look past the pandemic may be premature. At the same time, there are indications that US COVID cases may be hitting a peak.
It's now abundantly clear that this wave of COVID cases will have a detrimental affect on the US economy, particularly with supplementary employment benefits set to expire in two weeks. A sign of the shifting sands at the Fed came on Friday as Dallas Fed President Kaplan—who was one of the first to call for a September taper—said Delta is limiting production and slowing a return to the office. He highlighted the negative trend and said he may have to adjust his view by the time the Sept. FOMC rolls around.
His comments helped to turn sentiment in equities but there's also growing evidence that the US is near a peak in infections. The seven-day average of cases at time of writing is 151K, up from 129K a week ago. That's a slowdown in the rise. Moreover, Florida cases are now down week-over-week (with the caveat that data from that state is messy). Importantly, Trump urged supporters to get vaccinated on the weekend and the US boosted its vaccination pace to 1 million for three straight days, with about half of those receiving a first dose.
The price action in global FX last week certainly highlighted fears about COVID, Delta and whatever variant comes next. On Friday, however, there were signs of a reversal in equities and hard-hit CAD. US Treasuries are also showing no sign of fresh fears.