One week closer to Jackson Hole

Speculation over future Fed policy has dominated FX markets the past fortnight. Nonfarm payrolls last week fanned expectations of an earlier QE tapering timeline, while this week’s moderating CPI data cooled those expectations at the margin. With the two sets of pivotal data now released, markets are likely to settle somewhat as they await the headlines from the Jackson Hole symposium on August 27th. However, any adjustments to the wording around the number of participants calling for earlier QE tapering in July’s meeting minutes could result in the dollar taking another leg higher prior to Jackson Hole. While markets broadly await clarity over the timeline for US policy normalisation, next week’s calendar suggests there may be pockets of isolated volatility with policy decisions from both the Reserve Bank of New Zealand and the Norges Bank, while the Reserve Bank of Australia and Federal Reserve both publish meeting minutes. On top of that, retail sales data from the UK and Canada should provide a good gauge of consumer sentiment, while inflation and labour market data released across the globe should give markets further insight as to how respective recoveries are faring.

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Authors: 

Simon Harvey, Senior FX Market Analyst

Olivia Alvarez Mendez, FX Market Analyst

Ima Sammani, FX Market Analyst

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