Dollar falls as central bankers give few clues at Jackson Hole conference

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29 August 2017


Markets were disappointed by the lack of specifics in long awaited communications from the world’s top central bankers at the Jackson Hole, Wyoming symposium.

either President Draghi nor Chair Yellen gave any clues about the timing or speed at which monetary stimulus will be withdrawn. Instead, they both took swipes at the Trump administration, with Yellen focusing on the dangers of financial deregulation and Draghi defending the benefits of free trade and globalisation.

In the absence of any significant monetary policy news, markets mostly looked at strong macroeconomic news from the Eurozone and sold-off the Dollar in still thin holiday markets. The mass of speculative bets for further Euro appreciation increased to yet another record. Emerging market currencies continue to perform well as market appetite for riskier assets remains strong.

This week, economic news come back to the fore with a vengeance after the August lull. As always, the US payrolls report on Friday will be the center of attention but Eurozone inflation on Thursday and a raft of Japanese production indices will also be in focus.

Major currencies in detail


Sterling has largely been tracking the Dollar move lower against all other European currencies, albeit for different reasons. The weigh on Sterling is largely the perception that Brexit negotiations are not moving forward meaningfully. Clearly investors expect that the possibility of a messy exit will be more damaging to the British economy than to the Eurozone’s, and are selling the currency accordingly, last week to yet another all-time record against the Euro.

This week, Sterling may get some badly needed support on Friday from an expected strong manufacturing PMI activity number for August, as the weaker currency continues to provide some support to British goods exports.


Strong manufacturing data out of Germany provided fresh signs of cyclical momentum across the Eurozone. The key question is whether and when this increased level of activity will start to translate into upward pressures on inflation. On this, President Draghi gave few clues at Jackson Hole. The most important event for the common currency this week is inflation data out on Thursday. Markets are expecting core inflation to remain unchanged from July – any pull back could weigh on overstretched Euro positions.


In the absence of key macroeconomic news or any policy indications from Chair Yellen, the Dollar traded lower, partly on perceived political risks around the lifting of the debt ceiling by Congress in the next few weeks.

This week the payroll report should give further confirmation of a buoyant labour market that is operating at or near full employment. However, interest rate markets have continued to reduce their expectations for medium term rate hikes, ad are pricing less than a full Fed move for the entirety of 2018 – a very large gap with the expectations of even dovish Federal Reserve officials.