Chair of Federal Reserve, Jerome Powell, speaking on the economic outlook at the upcoming central bank’s Jackson Hole economic symposium, will dominate market direction. Fed officials appear on track to begin reversing their easy-money policies later this year, but several wild cards could alter the timing of their plans, including higher-than-expected inflation and rapidly rising Covid-19 cases associated with the spread of the Delta variant.
Gold rose as investors anticipate the annual Jackson Hole event happening this week for more insights into the Federal Reserve’s policy outlook. Gold’s rally also suggests some market traders do expect a dovish Jackson Hole event in the end. Bitcoin joined in the rally to top the closely watched $50,000 level again as the cryptocurrency market recovers from a disorderly rout just three months ago.
Dallas Fed’s President, Robert Kaplan, said last Friday that he is open to adjusting his view that the Federal Reserve should start tapering its asset-purchase program sooner rather than later if the Delta variant persists and hurts economic progress.
“I’ve got to be agile, open-minded, avoid being rigid about if I saw that the Delta variant was going to be persistent enough, or unfold differently, say than it has in other countries -- the UK or India -- and be more challenging to where it starts to affect demand,” he said in an online event hosted by Texas Tech University’s Rawls College of Business. “I’ve got to take that into account and will adjust my views accordingly.”
The Fed is currently buying $80 billion per month in Treasuries and $40 billion in mortgage-backed securities to inject liquidity into the market and bolster an economy rocked by widespread lockdowns. Kaplan has mentioned that he favours gradually reducing those purchases from October, as the support is leading to unintended consequences like an elevated housing market and higher rents.
Fed’s Chair, Jerome Powell, is expected to hint at prospects for an eventual reduction of monetary stimulus when he gives a speech this Friday, 27th August 2021. The address allows him to shed some light on officials’ intentions, after minutes of the July 27-28 meeting showed most of them thought it is appropriate to start slowing bond purchases later this year. The symposium, being held virtually again amid a coronavirus outbreak, will take place from Thursday to Saturday, 26th – 28th August.
If the Jackson Hole economic symposium becomes a more dovish event than expected, we might be able to see a sell-off in the US dollar.
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor.
Recommended Content
Editors’ Picks
USD/JPY flat-lines below 151.50 after soft Japanese CPI data
USD/JPY stays defensive below 151.50 after the release of a soft Japan's CPI report and mixed Industrial Production and Retail Sales data on Friday. Japanese verbal intervention also weighs on the pair amid the holiday-thinned conditions on Good Friday. US PCE inflation awaited.
AUD/USD buyers lack vigor above 0.6500 amid Good Friday trading lull
AUD/USD is trading listlessly above 0.6500 in the Asian session amid light trading on Good Friday. The Aussie pair shrugs off encouraging comments from China's FX regulator, as price action remains subdued ahead of the US PCE inflation data.
Gold flirts with record highs above $2,230, all eyes on US PCE data
Gold price flirts with record highs around $2,230 during the Asian session on Friday. The uptick of yellow metal is bolstered by the safe-haven flows amidst growing economic concerns and the prospect of interest rate cuts from the US Federal Reserve.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days. As this coiling up comes undone, investors can expect XRP to kickstart a massive rally.
Will they won’t they cut rates is the question of Q2?
There has been some significant push back from Fed and Bank of England members around the timing of rate cuts, and the Bank of Japan still haven’t physically intervened in the FX market to stem yen weakness although they are threatening to do so.