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WEEK AHEAD: AUGUST 24

Short Description

The US dollar has shown signs of a comeback so this week I discuss whether Jackson Hole – the annual gathering of central bankers will make a difference to what traders do next. I also rundown the important events on the economic calendar. Thanks! Rich

Video Script

Will Jackson Hole move the dollar? - THE WEEK AHEAD (Aug 24-28, 2020)

Hi everyone, for those of you not on your holidays and still trading strong – I’m previewing the week ahead in markets. The big question on everyone’s lips right now is what happens next to the US dollar? Well it’s the Jackson Hole symposium for central bankers this week so I’ll breakdown what that could mean for the dollar – as well as rundown this week’s economic calendar - in just a moment.

For those who don’t know, the Federal Reserve Bank of Kansas City hosts an annual event in Jackson Hole in the State of Wyoming. But did you also know that the Town of Jackson Hole is home to America’s longest running SHOOTOUT? Every Monday to Saturday throughout the summer there is a re-enacted shootout with real guns in the Jackson Hole Town square – and they’ve been doing it since 1957.

If that very American fact tickled your fancy – please click the like button – it really helps us spread the word about these videos!

So late Sunday or early Monday depending where you are we have New Zealand retail sales, which could be a swing factor for the Kiwi dollar. Tuesday is a big day for Germany with the latest update on Q2 GDP and August IFO data. I’ve added in French consumer confidence to give an up-to-date guide on sentiment in Europe. Then there is US durable goods orders. On Thursday and Friday it’s the Jackson Hole Symposium as well as Q2 GDP for the US and Canada.

Now unfortunately for central bankers looking forward to this year’s shootout –the Jackson Hole symposium this year will of course be online because of the pandemic. But it could still be a mover for forex markets. So taking a moment to review why our focus is on the US dollar. Short bets against the world’s reserve currency rose to their largest since 2011 last week and long bets on the euro were at a record high. That’s according to weekly CFTC data. At the same time the EUR/USD currency pair reached a 27-month high and came just shy of the big 1.20 level.

We saw the first real bout of US dollar strength at the end of last week following Fed minutes. Basically, markets are waiting for hints at a shift in policy to target a higher level of inflation from the Fed. It didn’t happen in the meeting minutes, so the next two possibilities for an update are at Jackson Hole – or the September Fed meeting. The possibility that the Fed will shoot for higher inflation has also been playing a big role in why gold has been hitting record highs, and why gold prices took another big hit after the minutes.

Investors are predicting that the Fed will A) adopt an average inflation target and aim to push inflation above 2% to make up for years of being under 2%, or B) Look to cap government bond yields in what’s known as yield curve control – I’ve explained this idea in previous Week Ahead videos.

So will the Fed reveal something at Jackson Hole on inflation targeting or YCC? Well the best information we have is that according to the Fed minutes “a number” of Fed members thought it would be “helpful” to make a revised statement on its policy strategy BUT they didn’t say when. I suspect the Fed is holding off until Congress agrees a new stimulus bill, which probably won’t be in time for Jackson Hole this week.

Right thanks everyone, good luck trading and make sure to subscribe to our channel so you don’t miss the next video.
 

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