- EUR/USD currently trades near 1.1831 versus 1.1850 in Asia.
- The pair is rangebound for the fourth conseuctive day.
- Markets expect Fed’s Powell to unveil an aggressive inflation-boosting strategy.
EUR/USD is lacking a clear directional bias for the fourth straight day with traders sitting on the fence ahead of the Federal Reserve chairman Jerome Powell’s speech at the annual Jackson Hole Symposium.
The pair is trading well within last Friday’s range of 1.1754-1.1883 for the fourth straight trading day.
Dovish expectations built in
Powell, during his speech at the Jackson Hole event on Thursday, is expected to outline a new strategy to spur inflation called average inflation targeting.
Under the new strategy, the Fed would allow inflation to run higher than normal for some period. In other words, the Fed would avoid raising rates in a knee-jerk reaction to above-target (2%) inflation.
“Language like this would be positive for stocks and negative for the dollar as it means the central bank will allow monetary policy to remain accommodative for longer than necessary,” according to BK Asset Management’s Kathy Lien.
The dollar index, which tracks the greenback against majors, has already declined by nearly 10% in the past five months. Further, dovish expectations seem to be quite loaded for Powell’s speech. As such, scope for disappointment is quite high.
The US dollar will likely pick up a strong bid, pushing EUR/USD lower if Powell falls short of signaling higher tolerance for above-target inflation.
Ahead of Powell’s speech, the pair may take cues from the preliminary US second quarter gross domestic product data and weekly jobless claims. These figures are scheduled for release t 12:30 GMT. The European data calendar is light.
Technical levels
Share
