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EUR/USD whipsaws as Powell drops inflation bombshell at Jackson Hole

  • Powell warns inflation remains “too high,” signaling potential for more aggressive rate hikes to bring it down to 2%.
  • Despite two months of positive data, Powell insists there’s a “long way to go” to achieve the Fed’s 2% inflation target, leaving markets jittery.
  • Economic growth and a robust job market could be double-edged swords, possibly warranting further Fed action to cool down inflation and maintain stability.

The EUR/USD pair trades volatile in a 40 pip range, as the Federal Reserve Chair Jerome Powell warns that inflation remains “too high” in his Jackson Hole speech. At the time of writing, the EUR/USD is trading at around the 1.0815-40 range.

Federal Reserve Chair Jerome Powell’s hawkish tone sent EUR/USD into a tailspin.

US Fed Chair Jerome Powel commented that the central bank is prepared to hike rates further, if appropriate, until inflation moves “sustainable down to 2%.” He emphasized that the Fed would remain data-dependent and proceed “carefully” when pulling the trigger and lifting rates.

Powell said there’s a long way to go, and just two months of good data is the beginning of the Fed’s road to tame inflation towards the 2% target. When talking about a neutral rate level, policymakers remain uncertain. Fed Chair acknowledged that current monetary policy faces risks on both sides regarding growth and inflation.

Regarding economic growth and the labor market, Powell added that growth has surprised to the upside, and it might be a reason for more rate hikes while adding that the job market not cooling could also warrant more Fed action. He added, he expects July Personal Consumption Expenditure (PCE) at 3.3%, while core PCE at 4.3%.

EUR/USD reaction

The EUR/USD hourly chart shows the pair skyrocketed towards 1.0839 before reversing its course and found bids at 1.0810. Since then, the major skyrocketed towards 1.0841 but has retreated below the daily pivot point at around 1.0830. US Treasury bond yields are failing to gain traction, while the US Dollar Index is pairing some of its earlier losses, is down 0.06%, and sits at 103.930.

EUR/USD 5 minute chart

EUR/USD

Overview
Today last price1.0832
Today Daily Change0.0022
Today Daily Change %0.20
Today daily open1.081
 
Trends
Daily SMA201.093
Daily SMA501.098
Daily SMA1001.0929
Daily SMA2001.0801
 
Levels
Previous Daily High1.0877
Previous Daily Low1.0805
Previous Weekly High1.096
Previous Weekly Low1.0845
Previous Monthly High1.1276
Previous Monthly Low1.0834
Daily Fibonacci 38.2%1.0832
Daily Fibonacci 61.8%1.0849
Daily Pivot Point S11.0785
Daily Pivot Point S21.0759
Daily Pivot Point S31.0713
Daily Pivot Point R11.0856
Daily Pivot Point R21.0902
Daily Pivot Point R31.0928

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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