Takeaway

The presenter argues that a surprisingly hawkish message from the Federal Reserve at Jackson Hole has created a near-term headwind for base metals. Markets have significantly repriced the odds of a September rate hike, leading to a stronger dollar and pressuring the complex. The speaker's firm (StoneX), however, holds a house view for only one more hike in December.

What the presenter said

• The macroeconomic backdrop for base metals has become more mixed over the last week. [00:00]
• This follows a more hawkish than expected message from Federal Reserve chairman Kevin Warsh at Jackson Hole. [00:05]
• Warsh reaffirmed the Fed's 2% inflation target and indicated that further rate hikes could be required if inflation remains elevated. [00:13, 00:16]
• While he made no firm commitment to a September move, markets raised the probability of a hike to around 60% from 35% previously. [00:23, 00:27]
• The US 2-Year yield rose 11 basis points to 4.34%, and the dollar strengthened. [00:34, 00:39]
• These factors are creating a near-term headwind for base metals. [00:41]
• The presenter notes that StoneX's house view is for one rate hike in December. [00:46]

Trade ideas

• None stated. The presenter did not put forward an actionable trade idea but summarised the market view as a near-term headwind for base metals.

Levels and data cited

• Fed Inflation Target: 2%
• Market Probability of September Hike: 60% (from 35% previously)
• US 2-Year Yield: 4.34% (rose 11 basis points)

Risks and what would invalidate this

• The key risk cited is that inflation remaining elevated could lead to further rate hikes beyond what is currently expected.