More hawkish, less depth

Daily update

The US and Iran have been trading missile exchanges in the Gulf, pushing oil back over USD 90 per barrel. US President Trump posted a AI-generated video of Kharg Island being destroyed, but there appears to have been no attack in the Iranian facility and the muted nature of the hostilities has created a muted market response.
Federal Reserve Chair Warsh’s Jackson Hole speech was hawkish in that it focused very clearly on prices. The content was not especially deep—Warsh highlighted the percentage of prices rising over 3%, without considering the impact of tariffs on that metric. As tariff effects fade, the proportion of prices rising over 3% should decline, so perhaps the metric was in focus to create a quick inflation “win”. Absent any inflation shocks, the comments are consistent with stable US monetary policy.
German flash August consumer price inflation is due. A small increase is expected, reflecting energy costs. French and Spanish consumer price numbers were broadly consistent with expectations.
Japan’s (nominal) July retail sales were stronger than expected, suggesting the Japanese consumer is offering some of the resilience seen in other advanced economies. The yen briefly weakened through 160 versus the US dollar, as it slowly drifts back to where markets believe fundamental value lies.