Let us check the market. The speech from the Federal Reserve Chairman, Jerome Powell, will most probably signal that the central bank will tweak its policy framework to help push up inflation. Thus, before it occurs on Thursday, the United States dollar remained near the one-week low it reached earlier.
Powell will address the Federal Reserve’s annual central bankers’ conference at 1330 GMT. Usually, the meeting takes place in Jackson Hole, Wyoming. However, it will conduct this year virtually because of the COVID-19 pandemic.
The changes will mean that the Federal Reserve will base its future monetary policy on realized rather than projected inflation data. Meanwhile, it will explicitly accept an overshoot in inflation. That means that the Federal Reserve will leave interest rates at their current lows for longer than in past crises. Thus, this, in turn, is weakening the united states dollar.
Dollar and Federal Reserve
There is potential for a correction in euro/dollar if Powell fails to meet those expectations. Last week, the euro/dollar rose as high $1.1966. This happened after the minutes at the July meeting, held by the Federal Reserve, revealed doubts concerning introducing yield-curve control. That is what an analyst at Commerzbank, Ester Reichelt said.
She said that FX market participants hope, therefore, that Jackson Hole will once again provide a little more clarity. Specifically, they want clarity about the immediate monetary policy outlook. Thus, the euro/dollar can find some new momentum in one direction or another.
John hardy works at Saxo Bank. He is head of FX strategy there. He said that the euro/dollar’s key technical triggers look to be close below 1.1700 or above 1.1900 to establish direction.
Earlier, the euro rose to a six-day high of $1.1850. After that, the euro last traded at $1.1807 <EUR=EBS>, down 0.2% on the day.
Furthermore, against six major currencies, the dollar’s index rose by 0.2% at 93.04.
That is leading news of the market.