USD

Yesterday’s US GDP numbers surprisingly showed the economy grew faster than initially thought in the second quarter of this year.

The injection of huge fiscal stimulus and the Covid vaccination roll out saw GDP back above its pre-pandemic peak. It increased at 6.6% on a annualised rate which was revised up from 6.5% reported in July. Corporate profits also increased. This will allow businesses to continue buying equipment and hiring workers and keep the the economy on solid footing for the third quarter.

The Jackson Hole symposium ends today and will be the market’s main focus, with Federal Reserve Chair Jerome Powell’s comments on tapering the box office event. 

The dollar actually strengthened marginally yesterday after hawkish tones from a few Fed members. However, a dovish tone from Powell could counter worries about economic damage from the Delta variant and fears about political fallout from the bomb attack in Kabul, possibly spurring bids in riskier currencies against the dollar. 

Dallas Fed President Robert Kaplan yesterday suggested he expects the Fed to start raising interest rates next year. Analysts took the comment as more hawkish than last week when he appeared nervous about the potential impact of the Delta variant on the economic recovery.

Two other members also downplayed the variant’s impact in separate interviews yesterday with one repeating a call for the Fed to start trimming its $120 billion in monthly bond purchases soon. The general consensus is Powell will strike a dovish tone and make no commitment to a time frame to taper. It’s widely believed Powell will instead announce tapering in the fourth quarter, giving a clear signal at one meeting before the actual announcement.

Key announcements 

All day – USD – Jackson Hole symposium
13:30 – USD – Core US PCE price index
15:30 – USD – Fed chair Jerome Powell speaks