FX Traders are preparing for a busy final trading session to the week this week with the Jackson Hole Symposium taking place and a huge focus on the Fed and the scheduled keynote speech from Chairman Kevin Warsh. Markets are expecting to see plenty of volatility for the dollar around the speech with September’s meeting still very much in the balance.
US rate futures are now pricing around a 40% chance of a rate hike next month, up from around 33% a week ago, despite weaker payrolls and some signs that price growth is beginning to moderate. However, this week’s PCE number confirmed sticky inflation conditions, and with Oil prices remaining elevated any fresh indications from the Chair could see substantial moves in the market.
The key question for markets will be whether Warsh can provide a clearer roadmap for bringing inflation back towards the Fed’s 2% target. Investors will be looking for a firm commitment to the inflation target, while also trying to gauge how the central bank would respond if price pressures remain elevated.
GBPUSD is, as always, expected to be volatile around the event and is sitting nicely from a technical perspective on the daily chart to move well should we have any surprise update from Kevin Warsh. It dropped off recent multi-month highs after the stronger PCE print but remains in striking distance of key resistance levels. Anything more hawkish from the Fed Chair should see the dollar appreciate and Cable drop back into recent ranges, while a more dovish outlook could see recent highs challenged into short order with any breaks of those levels like to see a push back towards annual highs.
Resistance 2: 1.3818 – Long Term Trendline Resistance
Resistance 1: 1.3675 – August High and Trendline Resistance
Support 1: 1.3434 – 200 Day Moving Average
Support 2: 1.3395 – Trendline Support
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