Focus shifts from Jackson Hole to US jobs data

This week’s FX price action was largely driven by Covid-19 developments, with a deteriorating health backdrop in the US slashing expectations that Fed Chair Powell would announce the tapering timeline formally at Jackson Hole. Given that Powell is expected to abstain from discussing policy at his Jackson Hole speech Friday afternoon, the market’s emphasis will shift to monitoring the severity of the latest Covid-19 waves driven by the delta variant, the economic impact they are having via timely data points, and August’s Nonfarm Payrolls data next week. A big jobs print could place the Fed in a precarious position, as progress seeps into the “substantial progress” needed for normalisation to begin at a time when the economic outlook becomes clouded with uncertainty again. Nonetheless, fixed income and money markets will be taking their cues from the latest payroll data in order to price expectations of September’s Fed meeting.

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