The greenback fell across the board in New York morning as Federal Reserve Chairman Jerome Powell's prepared remarks for the Jackson Hole summit hinted that there is no timeline on when the central bank would start tapering its asset purchases despite earlier hawkish comments by several Fed officials.
The U.S. economy continues to make progress towards the Federal Reserve's benchmarks for reducing its pandemic-era emergency programs, Fed Chair Jerome Powell said on Friday, in remarks that defended the view current high inflation will likely pass and stopped short of signaling the timing for any policy shift.
In prepared remarks for a speech to the Jackson Hole economic conference, Powell signaled the U.S. central bank will remain patient as it tries to nurse the economy back to full employment, repeating that he wants to avoid chasing "transitory" inflation and potentially discouraging job growth in the process - a defense in effect of the new approach to Fed policy he introduced a year ago. We have much ground to cover to reach maximum employment, and time will tell whether we have reached 2 percent inflation on a sustainable basis," Powell said. "If a central bank tightens policy in response to factors that turn out to be temporary ... the ill-timed policy move unnecessarily slows hiring and other economic activity and pushes inflation lower than desired. Today, with substantial slack remaining in the labor market and the pandemic continuing, such a mistake could be particularly harmful."
In other news, Reuters reported the U.S. Federal Reserve has met its goal of "substantial further progress" on both employment gains and inflation and should begin to reduce its massive monthly bond buys this year, Cleveland Fed Bank President Loretta Mester said on Friday. "I am comfortable that we are basically there," Mester said in an interview with broadcaster CNBC. Mester added that she would support the central bank announcing a plan in September "and then we start tapering some time this year."
On the data front, Reuters said U.S. consumer sentiment declined to its lowest level in nearly a decade in August as consumers' views of their personal financial prospects continued to worsen, a survey showed on Friday.
The University of Michigan said its consumer sentiment index fell to 70.3 in August - the lowest since December 2011 - from July's final reading of 81.2. Economists polled by Reuters had forecast a reading of 70.7. August's final reading was little changed from the preliminary reading of 70.2 earlier this month.
Versus the Japanese yen, dollar dropped initially to 109.89 in Asia on broad-based retreat in usd, however, the pair found renewed buying there and rose to a 2-week high of 110.26 in early New York trading on cross-selling in jpy. However, the pair tumbled due to heavy usd selling following the release of Fed Powell's prepared remarks and later hit session lows of 109.79.
The single currency retreated to 1.1743 at Asian open before rebounding to 1.1772 in early European morning. The pair then met renewed selling at 1.1767 ahead of New York open and fell to 1.1735 on hawkish comments from Fed's officials. However, euro then erased its losses and rallied to a near 2-week high of 1.1802 in New York morning on usd's broad-based weakness following Powell's dovish remarks.
The British pound also dropped in tandem with euro to session lows at 1.3679 (Reuters) in Asia before rebounding strongly to 1.3720 in early European morning on short-covering. Cable then found renewed buying at 1.3695 in Europe and jumped to a 1-week high of 1.3781 in New York morning on usd's weakness together with cross-buying of sterling especially vs euro.
Data to be released this week :
Japan retail sales, Australia business inventories, Swiss KOF indicator, EU business climate, economic sentiment, industrial sentiment, services sentiment, consumer confidence, Germany CPI, Canada current account, U.S. pending home sales and Dallas Fed business index on Monday.
Japan building permits, unemployment rate, industrial output, China NBS non-manufacturing PMI, NBS manufacturing PMI, New Zealand NBNZ business outlook, NBNZ own activity, Australia building permits, current account, net exports contribution, Japan consumer confidence, construction orders, housing starts, France consumer spending, GDP, CPI, producer prices, Germany unemployment change, unemployment rate, Italy GDP, CPI, producer prices, EU HICP, Canada GDP, U.S. redbook, monthly home price, Chicago PMI and consumer confidence on Tuesday.
Australia AIG manufacturing index, manufacturing PMI, GDP, Japan Jibun bank manufacturing PMI, China caixin manufacturing PMI, Germany retail sales, Markit manufacturing PMI, U.K. nationwide house price, Swiss manufacturing PMI, Italy Markit manufacturing PMI, France Markit manufacturing PMI, Italy unemployment rate, EU Markit manufacturing PMI, unemployment rate, U.K. Markit manufacturing PMI, U.S. MBA mortgage application, ADP employment change, Markit manufacturing PMI, construction spending, ISM manufacturing PMI and Canada Markit manufacturing PMI on Wednesday.
Australia trade balance, imports, exports, Swiss CPI, retail sales, GDP, EU producer prices, U.S. producer prices, international trade balance, goods trade balance, initial jobless claims, continuing jobless claims, labor costs, productivity, durables ex-defense, durable goods, factory orders, durables ex-transport, Canada building permits, trade balance, exports and imports on Thursday.
Australia AIG construction index, services, PMI, Kapan services PMI, China caixin services PMI, France budget balance, Markit services PMI, Italy Markit services PMI, Germany Markit services PMI, EU Markit services PMI, retail sales, U.K. Markit services PMI, U.S. Non-Farm Payrolls, private payrolls, unemployment rate, average earnings, Markit services PMI, ISM non-manufacturing PMI and Canada labor productivity on Friday.
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