The
renewed risk appetite in a week where most of the focus is on Fed
Chairman Powell's speech in Jackson Hole suggests that the market is not
thinking about an immediate reduction in the asset purchase program
discussed at the Fed's last meeting.
It
is unlikely that we will hear any details on the pace or duration of
the interest rate cut as that would have to be agreed upon and announced
at an FOMC meeting. It is likely that Chairman Powell will repeat many
of the comments made in the minutes, including that most FOMC members
favor an announcement on the gradual reduction of the asset purchase
program, depending on macroeconomic data.
At
a time when global growth may be peaking, markets won't want to start
worrying about the U.S. economy. If Powell is too ardent about the
risks, he could cause the dollar to react with a risk-off mode, as we
saw after the disappointing US retail sales and consumer confidence
numbers. Alternatively, if he doesn't give much time to risk and focuse
on the recovery and the merits of monetary policy normalization, the
dollar should also rally.
The
bears need him to pull off this balancing act. As you can see, it is
more likely that the elements are there for a continued rise in the
greenback.
(Chart Source: Tradingview 27.08.2021)
Disclaimer:
This material has been created for information purposes only. All view
expressed in this document are my own and do not necessarily represent
the opinions of any entity.