Powell opens USD selling window but NFP and covid could close it – MUFG

Fed Chair Powell certainly delivered a Jackson Hole speech that was as dovish as it possibly could have been. A USD selling window has emerged but could prove to be limited, according to economists at MUFG Bank.

Downside for dollar limited after Powell speech

“The speech was certainly cautious enough to imply a plan being announced at the FOMC meeting on 22nd September as being very unlikely. More likely now would be an announcement in November to begin tapering in December. That has lowered US yields but we are sceptical of this move extending much further and therefore suspect the fallout for the dollar over the coming days should become more limited.” 

“The NFP report on Friday is expected to show 750K new jobs recorded in August – enough to confirm a strengthening economy and provide support for yields and the dollar.”

“Powell’s speech has certainly opened up a window for USD weakness although it could close shut quite suddenly on either much stronger than expected jobs data this week or increased COVID-19 disruptions globally.”