Yesterday’s release of the FOMC meeting minutes confirmed that a rate cut last month was a “mid-cycle adjustment”. The document also showed that policymakers were sharply split on the course of action to take, which was assesses by investors as a not-so-dovish sign. Now, market focus shifts to Jackson Hole symposium, where Powell’s speech will set the tone.
Should the Federal Reserve governor refrain from an ultra-dovish tone and reinforce the central bank’s position as an independent bank after criticism from Trump who called for a rate cut of 100bp, the dollar will stage a rally, and expectations of aggressive easing will plunge. But in order to avoid a massive rise in the USD, Powell may opt to express a more neutral position and highlight the central bank’s data-dependence in decision making.
Anyway, the symposium that starts today could bring some volatility to global markets in general and dollar pairs in particular. As for EURUSD, a dollar-positive scenario could bring the pair back below the 1.1060 area. In this case, traders’ focus will shift to recent lows around 1.1025.
Should the Federal Reserve governor refrain from an ultra-dovish tone and reinforce the central bank’s position as an independent bank after criticism from Trump who called for a rate cut of 100bp, the dollar will stage a rally, and expectations of aggressive easing will plunge. But in order to avoid a massive rise in the USD, Powell may opt to express a more neutral position and highlight the central bank’s data-dependence in decision making.
Anyway, the symposium that starts today could bring some volatility to global markets in general and dollar pairs in particular. As for EURUSD, a dollar-positive scenario could bring the pair back below the 1.1060 area. In this case, traders’ focus will shift to recent lows around 1.1025.