All eyes on Fed chair Powell's speech in Kansas today (Jackson Hole)
The focus is all on Fed chair Jerome Powell this afternoon when he makes his speech at the Jackson Hole Symposium. After the Fed minutes this week, and comments from his colleagues at the Fed, the chair faces a tough job in trying to convince the consensus that a Fed cut more than 25bps at the September meeting is warranted - with the US data still on a relatively healthy footing. However, the PMIs yesterday were perhaps an early sign that weakness is creeping into the economy. Inflation is also sluggish at best and is the only strong argument to cut rates again.
However, labour markets are strong and consumption is also holding up well, so the odds for a 50bp cut next month have diminished again and it now seems unlikely that Jerome Powell will hint at the possibility of the larger cut, which may disappoint markets but also lift the USD once again.
As we can see this morning, EUR/USD - as the primary USD pair - is leaning to the downside again, and there is a clear risk that we could push lower towards the 1.1000-25 area once more. On the upside, 1.1110-20 resistance was a considerable resistance point as we saw Thursday morning.
USD/JPY is also proving to be very resilient in the meantime, with the market having sold persistently in the last few weeks and months - suggesting a possible short squeeze here. 107.50 is a target area on the upside, while the low 106.00's are harbouring strong bids as we saw yesterday.