All Eyes Are on Powell Today

As of writing, EURUSD traded below parity, GBPUSD trod water near 1.18, and USDJPY was near 137. Equities were slightly lower, while commodities traded flat.

Yesterday, we observed a fairly noticeable level of uncertainty amongst Fed members Bostic and Harker over whether the next step will be 50 or 75 basis points.

The CME’s FedWatch, which prices a 44% likelihood of a 50-basis point rise and a 56% chance of a hefty 75-basis point boost, indicated that markets shared this perspective.

Jackson Hole Speech

Later today, the Fed’s chair Jerome Powell will speak at the Jackson Hole symposium, surely causing volatility in the markets. Investors anticipate the Fed will confirm the willingness to battle soaring inflation. 

Importantly, there is a chance that markets have already discounted any hawkish bias, with a dovish approach probably moving markets more if Powell leans that way.

“Powell is likely to focus on the short-term challenges and endeavor to leave no doubt about the Fed’s determination in the fight against inflation,” economists at Commerzbank expect Fed Chair Jerome Powell to support the dollar with a convincing speech

Investors will also be paying close attention to US Core Personal Consumption Expenditure (PCE) data, which is predicted to fall from the previous print of 4.8% to 4.7%.

On Thursday, the second estimate of Q2 GDP for the US was released; it was revised higher from -0.9% to -0.6%. Additionally, Initial Jobless Claims decreased to 243,000 for the week ending August 19, exceeding market forecasts.