USD Gains Ahead of Fed Chair Jerome Powell's Speech

USD Gains Ahead of Fed Chair Jerome Powell’s Speech

FOREX: The United States dollar (USD) reached its highest level in more than two months against a basket of major currencies and the euro ahead of a speech by Federal Reserve Chairman Jerome Powell.

Fed Chair is expected at the Jackson Hole symposium later where he could hint at rates potentially rising further. The market still faces some level of uncertainty, though consumer inflation is receding.

 “The U.S. dollar extended gains to the strongest levels since the beginning of summer, as traders positioned for a hawkish speech from the Federal Reserve,” says Swissquote analyst Ipek Ozkardeskaya in a note.

“Pricing in the market suggests that the Fed may already be done with its rate hikes.”

The US dollar index earlier rose to 104.2720 while EUR/USD fell to 1.0777. The pair last traded at 104.208 and 1.0787, respectively. The Australian dollar weakened to around $0.64 amid a general greenback strength, as investors reassessed the outlook for US monetary policy ahead of Federal Reserve Chair Jerome Powell’s Jackson Hole address.

Signs of economic weakness in China, Australia’s largest trading partner, and the absence of meaningful support measures from Beijing also continued to weigh on the Aussie.

On the monetary policy front, the Reserve Bank of Australia kept its policy rate unchanged at 4.1% during its August meeting, defying market expectations for a 25 basis point rate hike, as the board wanted more time to assess the impact of previous hikes on the economy.

Meanwhile, most Asian currencies weakened against the dollar in the regional morning session amid possible position adjustment ahead of a speech at the Jackson Hole Economic Symposium later today.

There has already been a lot written about what Powell will say, ING economists say in a research report. The majority view is that he will tread a cautious path regarding any further potential tightening, seeking confirmation from the totality of economic data before committing to any additional rate increases, the economists add.

USD/JPY edges 0.1% higher to 145.95 and USD/SGD rises 0.2% to 1.3572, while AUD/USD is little changed at 0.6417. #USD Gains Ahead of Fed Chair Jerome Powell’s Speech

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