August 29, 2021

What Do Market Expectations From Powell's Speech At Jackson Hole?

 US Federal Reserve (Fed) Chairman Jerome Powell’s speech at the Jackson Hole symposium once again became the main focus of forex traders this year.

At last year’s conference, Powell had announced major changes in their policies that let inflation rise above central bank targets. The event had rocked the financial markets and had a huge impact on the US dollar at the time.

A month ago, investors expected the Fed to provide details to reduce bond purchases in Jackson Hole but the contagious Delta variant quickly complicated the central bank’s policy plans.

In the United States, there has been a strong labor market recovery and rising inflation, but on the other hand, new closures and sanctions in other countries pose risks to the global recovery.

The most important question at this point is when the reduction will begin. The continued rise in stocks is a sign that investors think that the Fed will delay the announcement of their plans until September.

This is supported by economic data showing declines in manufacturing and services sectors around the world including Australia, the UK, the European Zone, China and the US.

The Delta variant poses a risk of a global recovery and some investors believe the Fed could wait a few more weeks before signaling a reduction.

However, with the willingness of most of the Fed policymakers to make a quicker reduction, it would be no surprise if Powell suddenly issued a hawkish statement.

So, what are your expectations from Powell’s speech tonight? Dovish or hawkish?