Forex Today: Markets quiet down ahead of Jackson Hole Symposium
Here is what you need to know on Thursday, August 27:
The trading action remains choppy in the European morning on Thursday as investors refrain from taking large positions ahead of the highly-anticipated Jackson Hole Symposium. The US economic calendar will feature Goods Trade Balance data for July, alongside weekly Initial Jobless Claims figures.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.21% | 0.33% | 0.30% | 0.58% | -0.25% | 0.48% | 0.53% | |
| EUR | -0.21% | 0.13% | 0.02% | 0.36% | -0.45% | 0.27% | 0.32% | |
| GBP | -0.33% | -0.13% | -0.17% | 0.25% | -0.55% | 0.14% | 0.21% | |
| JPY | -0.30% | -0.02% | 0.17% | 0.33% | -0.46% | 0.27% | 0.31% | |
| CAD | -0.58% | -0.36% | -0.25% | -0.33% | -0.77% | -0.06% | -0.04% | |
| AUD | 0.25% | 0.45% | 0.55% | 0.46% | 0.77% | 0.72% | 0.77% | |
| NZD | -0.48% | -0.27% | -0.14% | -0.27% | 0.06% | -0.72% | 0.05% | |
| CHF | -0.53% | -0.32% | -0.21% | -0.31% | 0.04% | -0.77% | -0.05% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The US Bureau of Economic Analysis reported on Wednesday that Personal Consumption Expenditure (PCE) Price Index rose by 3.7% on a yearly basis, while the core PCE Price Index, the Federal Reserve's preferred gauge of inflation, increased by 3.3% in the same period. Both of these prints matched June's readings. Additionally, the annualized Gross Domestic Product (GDP) growth for the second quarter was left unchanged at 1.5% in the BEA's second estimate. The US Dollar (USD) Index edged higher following these releases and closed the day in positive territory. In the European morning on Thursday, the USD Index fluctuates in a narrow channel above 99.00. On Friday, Fed Chair Kevin Warsh will deliver a speech at the Jackson Hole Symposium.
US data strength nudges Fed expectations and lifts front-end yields
Strategists at Deutsche Bank argue that the latest releases amounted to “a solid slate of data that’s hard to square with a view that Fed policy is restrictive.” They note that, although “pricing of a September Fed hike was pretty stable (up from 36% to 37%), there was greater repricing of Fed expectations further out with 42bps of hikes now being priced by next June (+3.7bps on the day).” In rates, this shift left “2yr Treasury yields +3.6bps higher at 4.21%,” while “the sell-off was more modest at the long-end, with the 10yr up +1.8bps and the 30yr a marginal +0.2bps.”
In the meantime, analysts at DBS note that Fed Chairman Kevin Warsh’s keynote address at Jackson Hole on Friday, August 28, “remains the most important event this week,” setting the tone for how markets interpret the Fed’s policy stance. They stress that “Warsh faces a difficult balancing act: defending the Fed’s independence and price-stability mandate while providing greater clarity on the Fed’s reaction function without abandoning his preference for less forward guidance,” underscoring the challenge of reassuring investors on the Fed’s policy framework without committing to more explicit signaling.
In an interview with Al Jazeera on Wednesday, US President Donald Trump said that the economic warfare and military action against Iran were effective and added that they are not in a hurry to negotiation with Tehran. After rising marginally midweek, Crude Oil prices edge lower in the European morning on Thursday, with the barrel of West Texas Intermediate trading near $80.30 and losing more than 1% on the day.
EUR/USD holds steady at around 1.1650 after closing in the red on Wednesday. Later in the European session, the European Central Bank (ECB) will publish the Monetary Policy Meeting Accounts.
GBP/USD stays on the back foot after losing nearly 0.4% on Wednesday and trades below 1.3600 early Thursday.
USD/JPY holds steady above 159.00 after posting small gains for three consecutive days.
Gold (XAU/USD) came under heavy bearish pressure and lost more than 1% on Wednesday. Following the bullish action seen in the early trading hours of the Asian session on Thursday, XAU/USD turned south again and erased its daily gains. At the time of press, the pair was virtually unchanged on the day, slightly below $4,600.
Gold rally seen as fragile as TD Securities flags limited CTA support
According to TD Securities, precious metals are "finding comfort in this higher range," but the bank argues that "the scope for further CTA length from here is minimal," with discretionary flows now doing more of the heavy lifting. Looking ahead, TD Securities warns that, with the market "still pricing in hikes for 2027, and the energy market remaining a notable risk," the current move may prove premature, cautioning that "this rally may be too early for a renewed run back to record highs for the yellow metal."
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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