A double Fed’s game will help Dollar or crush it

This week was not a busy one for macroeconomic events, and it was also the quietest period of the summer lull, so most of the markets did not have strong moves. The brightest event of the week promises to be the speech of the Fed Powell's head in Jackson Hole, starting at 14:00 GMT.

It is widely expected that the Fed head will cement expectations for rates cut in September and note the flexibility of the policy. But the Fed heads since Greenspan, i.e. since the 1980s, have differed in the opposite way - the ability to create a maximum fog around the upcoming decisions, so as not to limit themselves in subsequent actions. It is much more likely that Powell will blame the trade wars for the deterioration of economic prospects and link his next steps with the negotiations.



For its part, Trump and other G7 leaders are likely to demand that central banks take active steps over the weekend, noting that this is the wrong time to strengthen fiscal stimulus. The blame game could be a major feature of the coming months, and the heat of the debate is likely to intensify as economic sentiment deteriorates.

In addition to the hot potato game regarding responsibility between the Central Bank and the government, the Fed is also being dragged into a kind of tug-of-war in expectations of rates. Markets are waiting for very aggressive steps to reduce Fed rates, assuming three more cuts by the end of the year, which supports stock prices and holds back the strengthening of the dollar. Fed officials tried to lower the level of these expectations during the week. Both Esther George (who did not support the latest decline) and Harker, who voted in favour of the cut, noted in their speeches this week that the economy does not need additional stimulus at the moment.

In our opinion, this line is most likely to be expected from Powell: we are ready to support the economy by reducing rates if necessary, but so far there is no such need.

If we are right and the Fed holds back the market expectations, the dollar may well soar from the current levels near 2-year highs and start growing rapidly in the area of the peak values of the end of 2016, adding 5% to the current levels up to 103 USDX and 1.03 EURUSD by the end of the year.



USD Index


Otherwise, If the expectations of the markets are right, it may start a long decline of the dollar, as it will be a clear easing of the Fed's rhetoric regarding what we have heard before.

FxPro UK Limited is authorised and regulated by the Financial Services Authority, registration number 509956. CFDs are leveraged products that incur a high level of risk and it is possible to lose all your capital invested. Please ensure that you understand the risks involved and seek independent advice if necessary.

Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. FxPro does not take into account your personal investment objectives or financial situation. FxPro makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any employee of FxPro, a third party or otherwise. This material has not been prepared in accordance with legal requirements promoting the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of FxPro. This communication must not be reproduced or further distributed without the prior permission of FxPro. Risk Warning: CFDs, which are leveraged products, incur a high level of risk and can result in the loss of all your invested capital. Therefore, CFDs may not be suitable for all investors. You should not risk more than you are prepared to lose. Before deciding to trade, please ensure you understand the risks involved and take into account your level of experience. Seek independent advice if necessary. FxPro Financial Services Ltd is authorised and regulated by the CySEC (licence no. 078/07) and FxPro UK Limited is authorised and regulated by the Financial Services Authority, Number 509956.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD clings to 3.5-week’s high, trades above 1.1000 figure

The pair is challenging the 1.1047 resistance. EUR/USD bull recovery from 34-month lows remains intact. Further coronavirus headlines are awaited.


GBP/USD hits new 2020 low and bounces amid Brexit rhetoric, coronavirus headlines

GBP/USD is trading above 1.2800 after hitting a new 2020, nearing the 1.2700 figure, as concerns about a no-trade-deal Brexit are weighing on the pound. Modest recovery seen in USD during the American session keeps the bearish pressure intact.


XAU/USD tumbles near two-week’s lows, sub-$1600/oz

Gold has been dropping sharply this Friday while reaching the 200 SMA on the four-hour chart. XAU/USD bulls gave up as sellers took the market down sharply. The bears seem to be in charge and more down could potentially be expected. 

Gold News

WTI remains under pressure around $45.00

Nothing new around crude oil prices, with rising concerns on the Chinese COVID-19 and its potential impact on the economy and the demand for the commodity keeping traders’ sentiment well depressed.

Oil News

FXStreet launches Real-Time Trading Signals

FXStreet Signals offers access to explanatory live webinars, real-time notifications when signals are triggered and exclusive membership to the company’s Telegram group, where users get direct guidance by our analysts and get room to discuss and interact.

More info

Forex Majors