Daily Market Update

Jackson Hole Symposium to Dominate Trade

August 25, 2017

After two weeks of anticipation, the central bank symposium in Jackson Hole, WY, will get into full swing today. The greenback has settled into tight ranges over this past week as traders squared their bets before big speeches scheduled today.

USD

After two weeks of anticipation, the central bank symposium in Jackson Hole, WY, will get into full swing today.  The greenback has settled into tight ranges over this past week as traders squared their bets before big speeches scheduled today.  Federal Reserve President Janet Yellen will kick off what looks to be a volatile day with a speech scheduled for 10 a.m. Eastern time.  Yellen’s speech has the potential to spark a dollar rally or send it to new lows across the board.  Traders will focus on her comments about inflation expectations and any indication of whether the Fed will increase borrowing costs again this year.  Expectations for a December hike have been falling this summer, but that can turn around with a few words from Yellen. 

While Jackson Hole will dominate headlines today, we have to keep an eye on developments in D.C. as the debt-ceiling deadline looms. The Federal government will run out of money sometime in early October so a deal must be reached to avoid a government shutdown.  The calculus for the dollar is simple: government shutdown = bad for the greenback.

The economic docket has let down the dollar this week and this morning’s print is no different.  Durable Goods orders fell 6.8% in the month of July, failing to miss estimates of a 6.0% contraction.  However, once volatile transportation orders are taken out of the number, orders were slightly up to 0.5%.  Under normal conditions, durable goods orders are a top tier data but attention is squarely focused on Yellen later this morning.

 

EUR

A few hours after Janet Yellen breaks down her view on the American economy, European Central Bank President, Mario Draghi, will take his turn to share his views on the EU.  Many ECB officials have tried to tamp down expectations that the ECB head will announce a major policy change at his meeting.  However, there is a precedent here.  Three years ago, Draghi announced his intention to add bond purchases to the ECB’s balance sheet, causing a massive sell-off for the Euro.

The final revision of German GDP affirmed that largest economy in Europe grew at 0.6%.  Again, economic data is largely being ignored ahead of the central bank speeches.

 

GBP

The British pound was mostly unchanged versus the U.S. dollar overnight, but it set for its fourth weekly loss against the U.S. dollar.  If the sterling is unable to stage a comeback, the consecutive losses would mark the longest losing streak since January 2015.  The sterling has been under pressure this week as the release of U.K. Brexit position papers did little to quell uncertainty.  The next round of negotiations will take place next week.

 

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