After Fed Chair Jerome Powell left open the possibility of future interest rate increases on Monday, the dollar dropped from a 12-week high as traders assessed the direction of U.S. monetary policy, and the yen remained close to its lowest level in more than nine months. In a much-anticipated speech at the annual Jackson Hole …
After Fed Chair Jerome Powell left open the possibility of future interest rate increases on Monday, the dollar dropped from a 12-week high as traders assessed the direction of U.S. monetary policy, and the yen remained close to its lowest level in more than nine months. In a much-anticipated speech at the annual Jackson Hole Economic Policy Symposium, Federal Reserve Chair Powell pledged to proceed cautiously at upcoming meetings as he recognized both concerns from the unexpected strength of the U.S. economy as well as progress achieved on alleviating price pressures. Powell said in a keynote speech, “We will move cautiously as we consider whether to tighten further or, alternatively, to hold the policy rate unchanged and await further data.”
The index is poised to end a two-month losing trend with a gain of more than 2% in August. According to Chris Weston, head of research at Pepperstone, “It’s still doubtful that the Fed would raise interest rates in September. But November is looking to be a “live” event, where data points could change expectations for interest rates. The Fed possibly starting up again in November is helping the dollar, according to Weston, at a time when many other G10 central banks have already priced in an extended pause.” A string of positive U.S. economic data releases has lessened concerns about a recession, but some investors are concerned that the U.S. central banks will maintain high interest rates for a longer period of time given that inflation is still above the Fed’s target. Investor attention this week will be firmly focused on reports on payrolls, core inflation, and consumer spending because of the Fed’s emphasis on the significance of the forthcoming U.S. economic data.
Rodrigo Catril, senior currency strategist at National Australia Bank (OTC: NABZY), stated that the Fed is likely through with its tightening cycle if the data continue to show an abatement in price pressures and labor market tightness. The yen dropped 0.03% to 146.45 per dollar, not far from the more than nine-month low of 146.64 it reached on Friday. Traders are still on the lookout for any indications that Japanese authorities will intervene in the currency market. According to the governor of the central bank, the Bank of Japan will continue to follow its present ultra-easy policy as long as underlying inflation in the country is “a little bit below” its objective. In the meantime, the euro and the pound sterling recovered from Friday’s two-month lows. While the pound last traded at $1.2599, up 0.17% on the day, the euro was up 0.04% to $1.0804. The New Zealand dollar increased by 0.32% to $0.592 and the Australian dollar increased by 0.55% to $0.644.
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