Market Update

Markets wrapped up the week on a downward trajectory.
The minutes from the US Federal Reserve's meeting at the end of July, unveiled on Wednesday (16 August), highlighted differing opinions among policymakers about the need for future rate adjustments. While some expressed concerns over the adverse economic repercussions of accelerated rate hikes, others emphasized the pressing need to address inflation. This hints at the possibility of more rate increases on the horizon. Even though many anticipate that the Fed's cycle of tightening may have reached its zenith, the officials remain committed to their data-driven approach and might consider additional hikes if supported by the data.
US retail sales data for July emerged as a focal point, showcasing a robust 0.7% month-to-month growth, outperforming the predicted 0.4% rise. The surge can be attributed to online purchases, particularly during Amazon Prime day, and consumers' spending on recreational and sporting items. This data underlines the consumer sector's durability, even amidst rising interest rates, fostering optimism for a smoother economic deceleration.
Conversely, the UK's retail landscape wasn't as vibrant in July, witnessing a steeper drop in sales than expected. Continuous rainfall acted as a deterrent for shoppers, and the strain of soaring inflation combined with a sequence of fourteen successive rate increases further exacerbated the decline. Policymakers should take into account that the escalating interest rates might be starting to dampen consumer spirit, in spite of the prevailing strong wage growth. Recent figures indicate a 1.2% monthly contraction in sales volumes for July, which is more significant than the anticipated 0.5% dip. This led to a dip in the sterling's performance as market players assessed whether this sales slump is an indicator of an impending stagnation in the UK's already tepid economic growth.
All eyes are now set on the upcoming annual economic policy symposium in Jackson Hole, Wyoming, which commences on August 24 and spans three days. This gathering will witness central bank officials globally deliberating on the challenges confronting economies. Among the esteemed line-up of speakers, Fed Chair Jerome Powell is set to take the stage. Market fluctuations are expected as investors keenly await insights and comments from the central banking community.