Published on 26.08.2022 15:55

The Euro has managed to break back up through the parity level in today’s trading session against the US dollar, but the party may be short lived as market participants await a speech later todays from US Federal Reserve president Jerome Powell who will address the who’s who of the financial world at the Jackson hole symposium.

Investors will be tuning in for clues as to the pace and trajectory of the central bank’s monetary policy tightening efforts as it looks to rein in inflation which is sitting at its highest level in 40 years.

They will also be looking out for the prospect of a future dovish pivot once it is deemed that inflation is being brought under control although it is doubtful, he will take such a turn at the meeting today.

“Powell is likely to push back on premature expectations of a dovish pivot, reiterating the focus on the fight against high inflation and the Fed’s data-dependency,” said Silvia Dall’Angelo, senior economist at Federated Hermes.

“While the latest data on U.S. inflation has been encouraging, suggesting headline inflation might have peaked in June, the Fed is not out of the woods: inflation is still very elevated, there are still price pressures in the pipeline and the outlook for commodity prices is uncertain amid persistent geopolitical tensions.” He added.

Around 3 quarters of market participants already predict that the Fed will deliver its third 75 basis points rate hike in September and continue with more rate hikes in November and December although the size of the hikes remains unclear.

Traders also expect the Fed's ongoing rate hike cycle to peak at around 3.8 percent which is well above the 3.3 percent predicted earlier this month which is going to leave the European Central Bank far behind when it comes to raising rates and put added pressure on the Euro.


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