US Dollar: Warsh speech shapes Dollar and Treasuries – BNY

BNY’s Geoff Yu highlights that markets will focus on Kevin Warsh’s first Jackson Hole appearance, with July PCE data seen as a precursor for U.S. rates and Dollar moves. The report stresses long-end Treasury volatility, questions around buybacks and term premium, and notes Canada’s GDP is unlikely to shift the broader North American macro narrative.

Warsh debut and PCE in focus

"Markets will spend the week anticipating Kevin Warsh’s first Jackson Hole speech as Fed Chair. The symposium’s theme, financial innovation, has little direct connection to recent market turbulence. But with long-end bonds still febrile, investors want to know how the Fed will respond to the Treasury’s actions."

"Wednesday’s Personal Consumption Expenditures (PCE) Price Index release leads this week’s calendar, with y/y core PCE expected to remain flat at 3.3%. But the real focus is Friday at 10 a.m. ET when Fed Chair Warsh delivers his first Jackson Hole speech. Canada stays quiet, with GDP on Friday the only notable release."

"PCE matters, but markets will likely treat it as a warm-up act for Jackson Hole. A softer PCE print would reinforce the pause in front-end hawkish repricing. The bigger question is whether it changes the broader policy story."

"For rates, the key question is simple: Does Warsh support, challenge, or avoid the Treasury’s recent buyback push and its impact on the curve? Any comments on the balance sheet, duration supply, or term premium could move the long end more than the data itself. That said, given Warsh’s typically restrained style, we aren’t holding our breath."

"Volatile markets persist, and long-end bond yields are the latest pressure point as fiscal and inflation concerns drive yields higher across major markets, including Japan and South Korea. Regional divergence is widening as local drivers take over."