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Slow start

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  • The week starts relatively quietly with the UK markets closed. German ifo data is scheduled, and some moderation is looked for by the market. ECB President Draghi's comments at the Jackson Hole holiday camp for economists were inclined to the dovish (with an accompanying well-worn plea for structural reform).
  • US Fed Chair Yellen's speech is being billed as more hawkish than some of her recent remarks, but really it was just an exposition on the difficulties of determining slack in the labour market, and why there may be a delay in wages rising as the labour market tightens.
  • It is worth stressing that the US Fed is not a dictatorship but (sort of) a democracy, and that the views of other Fed members need to be taken into account. The balance of opinion from Jackson Hole supports our view that the Fed will raise rates next year, and raise faster than markets currently assume.
  • Geopolitical risk lurks around. Russia's convoy has left eastern Ukraine, and the two sides are due to have talks tomorrow. Meanwhile America has said that operations against ISIS extremists could take place without reference to the Syria-Iraq border (i.e. moving into Syrian territory).