Update from North America

Buck in Tight Ranges Ahead of Warsh Speech

2 min read

The U.S. Dollar is trading in tight ranges ahead of Federal Reserve Chair Kevin Warsh’s keynote address at the Jackson Hole Economic Policy Symposium at 10am.

Jackson Hole has a reputation for creating headlines, but it will require a clear policy surprise or commitment to future action to trigger an outsized move for the Dollar. Warsh has repeatedly reaffirmed a distaste for any kind of forward guidance, which makes it likely that he will avoid sending any kind of policy signal. It is more likely that he instead focuses on broad economic themes or framework guidance, such as the Fed’s reaction function and inflation tolerance. Any surprise has the potential to drive Dollar volatility in the short term.

The University of Michigan’s final Consumer Sentiment Survey for the month of August is also due to be released at 10am and is expected to confirm the preliminary survey’s relatively weak print alongside slightly higher short term inflation expectations.

What to Watch This Week…

The complete Economic Calendar can be found here.

JPY

The Japanese Yen is the G10’s worst performer this morning following reports that the Ministry of Finance spent a record JPY 15.4 trillion (USD 96-99 billion) supporting the Yen in the period between July 30th and August 26th. Economists note that the record buying has only slowed the short-term slide of the Yen but has done little to fundamentally support it. Additionally, Japan’s two-year government bond auction that took place this morning saw weaker than anticipated demand as investors take caution ahead of the Bank of Japan’s expected interest rate hike next month. Japanese Government Bond futures fell 34 ticks as a result.

EUR

The Euro is down against the Buck this morning following the release of French and Spanish Consumer Price Index (CPI) numbers. The figures from the Eurozone’s second and fourth largest economies, respectively, both came in higher than expectations. Spanish inflation is running at nearly double the European Central Bank’s 2% target, while French inflation has accelerated from 2.1% in July to 2.4% in August. This has all but solidified interest rate hike expectations for the ECB’s September meeting.