How are energy investors positioned?
The US dollar gained on Thursday after stronger-than-expected PMI data lifted sentiment, even as Treasury yields edged lower, showing investors are still cautious ahead of Federal Reserve Chair Jerome Powell’s highly anticipated speech at the Jackson Hole Symposium.
The dollar index (DXY) climbed 0.1% to 98.757, reaching a one-and-a-half-week high of 98.834, while the 2-year Treasury yield dipped to 3.784% and the 10-year eased to 4.328%.
PMI Data Resets Expectations
The latest U.S. purchasing managers’ index came in stronger than forecast, suggesting the economy retains resilience despite recent soft spots in payrolls. This surprised investors who had been leaning toward aggressive rate-cut bets. Instead, the data prompted markets to scale back expectations for near-term easing, leaving traders in a jittery mood as they await Powell’s remarks.
Dollar gains momentum as PMI surprises to the upside
Reading the Signals
Normally, stronger economic data would push both yields and the dollar higher. But the divergence—dollar up, yields down—shows how investors are hedging both ways. Some are betting Powell will stress longer-term structural challenges like demographics and productivity, while others fear he could still leave the door open to September cuts.
Market Implications
|
Asset Class |
Scenario |
Likely Impact |
|
FX |
Dovish Powell |
Dollar weakens |
|
Bonds |
Hawkish Powell |
Yields rebound |
|
Equities & Gold |
Soft tone |
Relief rally; hawkish tone could reverse it |
Outlook
Markets are essentially frozen in anticipation. Powell’s Jackson Hole speech has historically been used to deliver policy signals, and investors remember last year’s address foreshadowing a rate shift. This time, whether Powell leans toward labor-market weakness or inflation’s persistence will set the tone for the dollar, bonds, and risk assets in the weeks ahead.