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Jackson Hole Market News

Weekly Market Outlook: All eyes on Jackson Hole

A calm trading week is ahead as no central bank meeting is scheduled and a few economic data releases. The Eurozone PMIs will take the lead before the market turns its focus on Jackson Hole Symposium searching for any clues on potential policy and economic paths. The prelim reading for US GDP is scheduled later in the week, followed by PCE inflation figures on Friday. 

USD Looking forward to Powell’s Speech 

The greenback will be waiting for several events this week. The major one will be the speech of Fed Chair Jerome Powell on the economic outlook during the Jackson Hole Symposium on August 27th. 

The speech will be fully watched by the USD traders everywhere especially after the release of FOMC Minutes last week. The minutes showed that if the economy evolves as expected, then reducing the asset purchase will likely be needed later this year. This revived hopes that the Fed will start shifting its policy stance towards tightening. However, Fed’s officials stressed that there is no link between tapering and potential interest rate hikes. The main concern among the members seems to be the latest inflation surge, while opinions varied widely regarding the potential path of the economy. Powell’s speech is expected to give more clarification about possible policy decisions expected later this year. 

The dollar index (DXY) was last seen trading higher by more than 1% supported by tapering clues.  

USD
USD

On the data front, the dollar will be waiting for the GDP prelim data for Q2. The US economy is expected to expand by 6.6% in the second quarter. The PCE inflation, Fed’s preferred gauge of inflation, will be released on Friday. The annual PCE index is expected to stabilize near 4%. Expectations refer to a 3.6% rise in core PCE inflation on an annual basis and 0.4% monthly. 

Will the Data Support the Euro? 

The European Central Bank will be releasing its monetary policy meeting minutes on Thursday, with investors hoping they might provide some clarity on future moves. In July, the central bank pledged to keep its accommodative monetary policy stance until inflation durably reaches the 2% target, which is not expected to happen until at least 2023.

Economic releases this week include the flash PMIs for the Eurozone which are expected to point to another month of strong expansion in the private sector during August. Other key data to follow is Germany’s final second-quarter GDP numbers on Tuesday.

The Euro has been suffering from selling pressures as the ECB sticks to its dovish tone while keeping its extra loose policy. Better than expected data figures may offer some support for the single currency, however, it may find it difficult to hold gains against its peers, especially the USD that is backed by policy divergence in both US and Eurozone.

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