6 days ago
Dollar Steady as Markets Await Warsh’s Jackson Hole Speech
The dollar changed very little on Thursday.
Investors are waiting for Kevin Warsh to speak at a meeting in Jackson Hole on Friday.
They want to learn what the Federal Reserve may do with interest rates.
Fewer Americans filed new unemployment claims than economists expected.
However, the United States also reported a larger goods trade deficit.
Recent inflation data was higher than expected, which could keep interest rates high.
Some Federal Reserve officials said they remain worried about inflation.
The dollar rose slightly against the Japanese yen after a Bank of Japan official discussed timely rate increases.
Investors are unsure whether Warsh will give clear advice about future policy.
The dollar index edged up 0.05% to 99.18 after U.S. economic data.
Investors are watching Federal Reserve Chair Kevin Warsh’s Friday speech for policy clues.
Weekly U.S. jobless claims fell to 203,000, below economists’ 208,000 estimate.
The U.S. goods trade deficit widened to $118.8 billion in July.
The dollar strengthened against the yen after Bank of Japan comments on possible rate hikes.
- Who
- Currency investors, Federal Reserve Chair Kevin Warsh, several Federal Reserve officials, and Bank of Japan Deputy Governor Ryozo Himino.
- What
- The dollar remained roughly flat as markets assessed U.S. economic data and awaited Warsh’s Jackson Hole speech.
- Where
- Currency markets and the Jackson Hole central-bank symposium.
- When
- Thursday, Aug. 27, with Warsh scheduled to speak on Friday.
- Why
- Investors are seeking clues about interest-rate policy amid inflation concerns, higher Treasury yields, and possible rate hikes by the Bank of Japan.
Hawkish Policy View
Limited-Guidance View
Inflation and interest rates
Hawkish Policy View
Higher-than-expected inflation and comments from Jeffrey Schmid, Beth Hammack, and Austan Goolsbee support keeping interest rates restrictive.
Limited-Guidance View
The probability of a rate hike at the Federal Reserve’s next meeting fell to 35.9%, indicating that markets are not fully pricing an immediate increase.
Warsh’s Jackson Hole speech
Hawkish Policy View
Investors expect Warsh’s remarks to clarify how the Federal Reserve will respond to higher Treasury yields and inflation risks.
Limited-Guidance View
Many market participants expect Warsh to avoid providing specific monetary-policy guidance.
Dollar direction
Hawkish Policy View
A clear, hawkish message from Warsh could strengthen the dollar by supporting expectations for restrictive policy.
Limited-Guidance View
Seasonal dollar selling around Jackson Hole may continue regardless of the precise policy message, with the speech affecting the magnitude rather than the direction.
Key facts
- Dollar index
- Rose 0.05% to 99.18.
- Euro
- Fell 0.03% to $1.1646.
- Weekly jobless claims
- Declined to 203,000, below the 208,000 estimate.
- U.S. goods trade deficit
- Widened to $118.8 billion in July from $101.4 billion in June.
- September rate-hike probability
- Expectations for at least a 25-basis-point hike slipped to 35.9%.
- Dollar-yen exchange rate
- The dollar rose 0.09% against the yen to 159.45.
- Sterling
- Softened 0.06% to $1.3585 as investors reduced expectations for a Bank of England rate hike this year.
Quotes
Erik Bregar
Director of FX and precious metals risk management at Silver Gold Bull in Toronto
“Warsh is saying the Fed needs to speak less so that the price signals from the bond market are cleaner, and then Bessent wants to distort those signals by intervening. It makes no sense. So that's why it's even more important for Warsh to set the record straight tomorrow, because if he doesn't, the dollar could actually puke.”
livemint.com
“I'm surprised the dollar's not a bit stronger actually. The FX market, honestly, is in a bit of a trance.”
livemint.com
Sources
Related news
Treasury Yields Hold Firm Ahead of Warsh’s Jackson Hole Speech
Warsh’s Jackson Hole Speech Tests Fed Independence and Inflation Strategy
Dollar Jumps After Warsh Comments, Set for Weekly Gain
Dollar Falls as Treasury Buyback Concerns Pressure Currency
Sticky US inflation lifts dollar, revives Fed hike bets
Dollar slips as traders weigh Fed hike odds, jobs data
Fed official warns rate hike if inflation progress stalls
Warsh Weighs Rate Cut as Inflation Keeps Pressure High
Fed Officials Renew Inflation Warnings as Rate-Hike Bets Return
Gold retreats on profit-taking after two-month peak on inflation data