FX markets brace for volatility as attention turns to Jerome Powell’s Jackson Hole speech
FX markets are quiet in front of Powell’s speech later today. Investors will be listening to the Fed Chairman for any significant change in monetary policy especially around inflation. Economists expect the Fed to commit to keeping the overnight Fed Funds rate at zero for up to five years. Also, economists expect the Fed to adjust it’s inflation target (2%) to allow for averaging. This would essentially give the Fed room to allow for higher inflation (greater than 2%) for longer.
“You only have to do a few things right in your life so long as you don’t do too many things wrong.”
August 27, 2020
EUR/USD 1.1838 GBP/USD 1.3224 USD/CAD 1.3137 AUD/USD 0.7259 USD/JPY 106.06 USD/CNH 6.8861 USD/ILS 3.3677 USD/MXN 21.9055 USD/CHF 0.9081 USD/INR 73.8150
Jobless claims for last week came in as expected with little improvement over the past couple weeks. The data does not support a V-shaped recovery. Market focus turns to Jerome Powell as he delivers an update on the Fed’s policy framework review at the central bank symposium later today. The conference takes place virtually and is viewable by the public for the first time.GBP
A relatively quiet day in the UK on the economic front, with no major data releases scheduled. London-based FX traders report markets are focused on the US with the Fed chief’s speech later today, potential damage from hurricane Laura and presidential election rhetoric.EUR
The euro rally, which saw a 10% gain vs. the dollar since May, is at a pivotal point with news on Covid, Brexit and monetary policy baked into exchange rates. FX markets will be looking for any significant change in the Federal Reserve’s stance on inflation when Jerome Powell speaks today. On Brexit watch, Germany is reported to have cancelled plans to discuss the topic at a meeting with EU ambassadors next week as there has not been “any tangible progress”.CAD
The Canadian dollar continues to trade stronger hitting levels not seen since February. The price of oil has supported a stronger loonie as have comments by Bank of Canada officials suggesting they will let inflation run higher in the future to support economic growth.ASIA/PACIFIC
The Australian dollar trades at its strongest level vs. the US dollar since January 2019. FX traders pointed to yesterday's sales of Australian government bonds as driving demand for the A-dollar.
The Japanese yen was steady overnight on news Japanese Prime Minister Shinzo Abe will serve out the remainder of his term after recent hospital visits raised questions about his health.
For more analysis on FX markets or information regarding SVB's FX services:
See all of SVB's latest FX information and commentary at www.svb.com/trends-insights/foreign-exchange-advisory
By providing your email address and clicking on the Subscribe button below, you consent to receive emails from Silicon Valley Bank for your chosen categories. You also consent to the terms of our Privacy Notice. If you have privacy questions, you may contact us at PrivacyOffice@svb.com. You can withdraw your consent at any time.
Thank you for subscribing to SVB's Daily FX Update.
You're almost done. Please check your email box and follow the instructions to confirm your subscription. If you did not receive an email please check your Spam or Bulk E-Mail folder just in case the confirmation email got delivered there instead of your inbox. If so, select the confirmation message and mark it Not Spam, which should allow future messages to get through. Please add us to your trusted list of senders, contacts or address book.
Please note that we will continue to send you communications that we need to send you (for example, to keep you updated on operational changes to your account, a product or a service) or that we are required to send you by law.
This article is intended for U.S. audiences only.
©2021 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of the FDIC and the Federal Reserve System. Silicon Valley Bank is the California bank subsidiary of SVB Financial Group (Nasdaq: SIVB). SVB, SVB FINANCIAL GROUP, SILICON VALLEY BANK, MAKE NEXT HAPPEN NOW and the chevron device are trademarks of SVB Financial Group, used under license.
The views expressed in this email are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates. This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decisions. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.
Foreign exchange transactions can be highly risky, and losses may occur in short periods of time if there is an adverse movement of exchange rates. Exchange rates can be highly volatile and are impacted by numerous economic, political and social factors, as well as supply and demand and governmental intervention, control and adjustments. Investments in financial instruments carry significant risk, including the possible loss of the principal amount invested. Before entering any foreign exchange transaction, you should obtain advice from your own tax, financial, legal and other advisors, and only make investment decisions on the basis of your own objectives, experience and resources.