27/08/2020

Markets steady ahead of FED’s speech


GBP

This week’s biggest scheduled event for Sterling will be held in Jackson Hole where Bank of England Governor Andrew Bailey’s speaks on Friday. Bailey is not expected to deviate much from the BoE’s current stance on inflation and the UK’s coronavirus recovery plan. However, any surprises will have the potential to move Sterling in either direction.

Beyond that, there are few factors to provide direction for the currency. This quiet period, data wise, will continue over to next week where the only headline release for the UK is Markit PMI revisions.

USD

The dollar and the euro largely traded sideways yesterday as currencies markets held back from taking risky bets a day ahead of a key speech by Federal Reserve Chairman Jerome Powell.

There is growing speculation that Powell could unveil a softer policy stance towards inflation at the annual Jackson Hole retreat today. Currency markets are bracing for the Fed’s possible new steps to prop up the US economy. If the Fed do decide to target an average inflation over time rather than setting a fixed 2% goal, this would likely mean lower interest rates for longer for the US. If this move is confirmed, the dollar would stand little chance of a meaningful rebound anytime soon against its major currency rivals who have gained so much on the dollar over the past few months.

Key announcements

Jackson Hole symposium to run all day, key speakers scheduled for:
14:00 – US Fed Chair Jerome Powell
15:50 – ECB chief economist Philip Lane
12:30 – US GDP data. Expected to rise to -32.5% from previous reading of -32.9%


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