Federal Reserve Chair Jerome Powell is predicted to undertake a reasonable tone throughout his speech on the Jackson Gap symposium, in response to a current word from Macquarie analysts.
Whereas Powell’s remarks might be carefully scrutinized by markets, Macquarie suggests that he’s unlikely to lean too dovish in his commentary.
Macquarie analysts spotlight that Powell’s tone, together with upcoming information and political developments, may affect the path of the U.S. greenback (USD) within the close to time period.
Particularly, they word, “We wouldn’t be surprised by a moderate tone from Powell,” which may have implications for forex markets and investor sentiment. They add: “Yet, we doubt that Powell will be so bold as to sound so ‘dovish.'”
The analysts additionally level out that any post-convention rally in Kamala Harris’s polls subsequent week may contribute to additional USD weakening.
The word locations Powell’s anticipated remarks within the context of broader market dynamics, notably the current decline within the USD.
They word that over the previous 4 weeks, the USD has skilled vital weak point, which Macquarie attributes to the unwinding of the “Trump trade” that favored a powerful greenback.
This decline has additionally been influenced by expectations that the European Central Financial institution (ECB) and the Financial institution of England (BoE) could not match the Fed’s anticipated fee cuts this yr.
The analysts additional observe that European wage development may play a task in shaping the near-term outlook for the USD.
They level out that current indicators recommend European inflation would possibly stay a deeper concern for ECB policymakers than for the Fed, notably as a result of persistent service-sector wage pressures.
Whereas Powell is predicted to strike a balanced tone at Jackson Gap, Macquarie’s word underscores the advanced interaction of things, together with wage development in Europe and U.S. political developments, that might influence the USD’s trajectory within the coming weeks.