At Jackson Hole, Jerome Powell stuck to his official line and said that the continuous growth the US is currently experiencing justifies the continued gradual rise in rates. “There is good reason to expect that this strong performance will continue… I believe that this gradual process of normalisation remains appropriate”, he declared. A quarter-point hike in key rates at the September 26 monetary policy meeting is now seen by the markets as certain. The minutes of the last meeting of the Fed’s monetary policy committee in July had already given a glimpse of such an outcome.

On Monday, President Donald Trump said he had reached an agreement with Mexico to replace NAFTA in a conference call held in the oval office with Mexican President Enrique Peña Nieto. The Mexican President said he was relatively confident that a similar agreement would reached quickly with Canada and that the latter would also be a party to the new treaty. Mr Trump was more evasive, but he wanted negotiations to take place quickly. Canadian Minister of Foreign Affairs Chrystia Freeland interrupted a trip to Europe to visit Washington. Donald Trump, on the other hand, rejected the prospect of a trade deal with China stating, “it’s just not the right time to talk right now”. He also spoke by telephone with Angela Merkel according to a White House press release. According to the statement, both parties have strongly committed to support talks between Washington and Brussels to resolve the trade dispute. They also discussed other topics such as Syria and Ukraine. Yesterday the Mexico Stock Exchange reached its highest level since January.

The hope of a decline in tensions between Washington and its trading partners is encouraging the market to recover its risk appetite and easing the pressure on safe havens. Thus, the Swiss franc went over 1.1400 against the single currency after touching 1.1243 in mid-August.

In the United Kingdom, the British Finance Minister denied yesterday that the government had asked Mark Carney, the Governor of the Bank of England, to stay an extra year after the end of his term in June 2019. While Theresa May tries to play down the consequences of a no-deal Brexit, talks are struggling to move forward. Talks have always been scheduled to end in October this year. But, in view of the difficulty, rumours leaked yesterday suggesting that the deadline could be pushed back to mid-November. If this were to be the case, it will confirm that negotiations are very difficult – even bogged down. With Brexit set for March 29, everyone agrees that, in any case, talks must be completed by December.

As a new round of US sanctions is hitting Russia, Washington plans to ban US citizens from buying new issues of Russian sovereign debt with maturities longer than fourteen days. Twenty-eight percent of Russian bonds are held by foreigners. For its part, the Central Bank of Russia has said it has suspended purchases of foreign currency until the end of September. These purchases were intended to replenish the Central Bank’s foreign exchange reserves. The Bank believes it has enough instruments to ward off threats to the country’s financial stability. Apart from a peak during the day of August 13, the rouble hasn’t traded this low against the dollar since mid-2016. In addition, the Minister of Economy has revised his growth forecast for 2018 to 1.8% against 1.9% previously because of the weak rouble and US sanctions.

On the agenda of the coming days, the publication US GDP figures this afternoon is particularly noteworthy. Then we will have the monetary policy meeting of the Central Bank of Australia on Tuesday and that of Canada on Wednesday.

Levels

EUR/USD  1.1680 DOW JONES 26’064.02
USD/CHF  0.9770 SMI 9‘084.26
EUR/CHF  1.1410 BRUT 68.50
USD/RUB  67.89
XAU/USD  1’202.50