Fed Cut Expectations Pulled Back

• Overnight, US jobless claims rose 11k last week to 235k, coming in modestly above expectations.
• At the same time, Manufacturing PMI surprised to the upside, with details pointing to lingering price pressures, lifting US Treasury yields by around 3bps on the 10-year.
• Against this backdrop, Cleveland Fed President Beth Hammack noted recent data do not yet support a September cut, striking a cautious tone.
• Attention now shifts to Chair Powell’s remarks at Jackson Hole, his first since the weak July jobs report. Markets will be watching for how he frames labour market risks and whether he pushes back on near-term easing bets.
• Reflecting this uncertainty, money markets have pared back expectations, with a September cut now ~70% priced versus 85% at the start of the week.