A clearly hawkish message from Powell will lift the USD – Scotiabank

FXStreet Insights Team FXStreet

Fed Chairman Powell’s set-piece speech at the Jackson Hole central bank gathering is the focal point for markets today. Economists at Scotiabank analyze USD outlook ahead of themost interesting event of the day.

The USD looks more or less fairly priced for the status quo on rates

After the hawkish-sounding minutes from the July FOMC meeting, Powell may come across as a little more measured. Some of his colleagues appear to think that the Fed has done enough but Powell might want to leave the door open to a little more tightening or stress ‘high for longer’ risks in his comments – if only to keep the Fed’s options open and dampen market expectations for rate cuts ahead.

If September really is ‘live’, he really should encourage swaps pricing to get a little more aggressive, with a 25 bps hike on the 20th reflected as only a 20% risk.

The USD looks more or less fairly priced for the status quo on rates here; a clearly hawkish message from Powell today will lift the USD but a more nuanced approach to the outlook may mean more USD range trading, with the broader risk tone defining short-term USD movement.

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold treads water around $4,000

Gold prices maintain its offered stance in place at the end of the week, hovering around the key $4,000 threshold per troy ounce. The persistent selling bias in the precious metal comes amid decent gains in the US Dollar and an acceptable rebound in US Treasury yields across the curve, all alongside further upside traction in crude oil prices.

Crypto Today: Bitcoin holds the 50-day EMA as Ethereum and XRP face structural resistance

Bitcoin gradually ticks up on Friday, trading above $81,000. The Crypto King has recently defended structural support near $80,000, reinforcing the prevailing bullish outlook. Ethereum similarly edges higher above $2,400, while Ripple trades above $1.32 after testing support around $1.30.

The French bond panic is overdone. Here's what the market is misreading

France's 10-year government bond yield has climbed above 5%, reigniting fears of a sovereign debt crisis in the Eurozone. With public debt exceeding €3.5 trillion, persistent budget deficits and a fragmented political landscape, investors are increasingly questioning the French government's ability to stabilize its finances.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.