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Powell to take centre stage at Jackson Hole

Market participants will focus on the speech of the Fed's chair today as central bankers gather for the annual symposium at Jackson Hole in Wyoming.

Centtrip: Powell to take centre stage at Jackson Hall

The Dollar has hit another 11-year high against the Chinese Yuan ahead of Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium of central bankers later today.

Powell is expected to reiterate that the US central bank has not entered another prolonged monetary easing cycle. Further doubts about easing have emerged after two Fed officials said they saw no reason to cut interest rates again without new signs of economic weakness.

The currency market has in recent months been driven by global central banks’ shift to more accommodative policies as economic growth slowed and US-Chinese trade tensions intensified.

While expectations that the Fed will cut rates in September are still very high at 91 per cent, according to interest rate futures, this could change if Powell’s comments do not match the current dovish expectations.

The Fed chair is likely to acknowledge that fallout from the US-Chinese trade war may have a further negative impact on the global economy and may support the need for additional rate cuts. However, he is also expected to ensure he is not seen as bending under President Donald Trump’s repeated attacks and demand for further monetary policy easing.

Key currencies today

The Dollar was on course for a 0.2 per cent gain against the Yen and ground higher to ¥106.59 this morning, but remained within the recent trading range.

The Pound retreated from a more than three-week high to 1.1016, while the Chinese Yuan fell to 7.0961 per Dollar – its lowest since March 2008.

Concerns about China’s economy are growing as US tariffs on about $150 billion’s worth of Chinese goods are due to take effect on 1 September. This is about half the value that Trump had previously threatened, but he has now set 15 December as the new for imposing tariffs on the remainder of imported Chinese goods.

The New Zealand Dollar was the biggest mover overnight, jumping from a three-and-a-half-year low by 0.4 per cent after the central bank’s governor, Adrian Orr, said he was “pleased” with where interest rates were, hosing down expectations of more rate cuts.

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