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Lower for longer?

Today’s news headlines:

‘Fed to tolerate higher inflation in policy shift’. The Federal Reserve has decided on a new strategy for monetary policy that will allow for temporary uplifts in inflation over its traditional 2% target. The announcement, by Chair Jerome Powell at yesterday's Jackson Hole Symposium, has cemented expectations that the US central bank will keep interest rates at ultra-low levels for the foreseeable future. Powell commented that the Federal Open Market Committee’s strategy for achieving its goals must adapt to the challenges that arise and that seeking an average inflation target could compensate for a prolonged period of below 2% inflation. (Financial Times)

‘Shinzo Abe to step down as Japanese Prime Minister’. Japan’s Prime Minister and proponent of economic policies dubbed ‘Abenomics’ will step down due to a worsening medical condition, ending an eight-year term in office. Abe delivered on his promise of a period of strong economic growth for the country while also achieving political stability during his record time in office. (Financial Times)

Today's events, rates, and data 

  • Japan’s stocks tumbled, reversing a gain earlier in the day, while the Yen strengthened on reports that Shinzo Abe will resign. Meanwhile, US stocks reacted well to a more accommodative Federal Reserve, with the S&P 500 setting a new intraday high above 3,500 points. The US Dollar extended its recent slide, while demand for 10-year US treasuries dropped off, increasing yields.

Today's events

German Gfk Consumer Climate: -1.8 vs -0.2 previously
Day Two of the Jackson Hole Symposium: All day
Canada GDP: 1.30pm
US Core PCE Price Index: 1.30pm
US Personal Spending: 1.30pm
UK BOE Governor Andrew Bailey Speaks: 2.05pm
US Chicago PMI: 2.45pm
US Revised UoM Consumer Sentiment: 3.00pm

Interbank rates:

GBP/USD: 1.3260
GBP/EUR: 1.1180
EUR/USD: 1.1860
USD/CAD: 1.3090