- USD / JPY carries control as markets focus on the risk of Jackson Hole ahead.
- The pair’s price takes a new low as geopolitical risks simmer, supporting the yen.
The USD / JPY is currently trading at 105.83 as the Yen extends its lead against the greenback to a low of 105.80, knocking out New York lows.
The US dollar lost ground in the New York session as markets moved away from the risk associated with the upcoming Jackson Hole and Fed Chairman Jerome Powell’s keynote address scheduled for 2:10 pm GMT. More information below.
Meanwhile, as with the data, durable goods orders in the United States rose + 11.2% in July (estimate + 4.7% MoM, before 7.7% MoM), playing the supporting role of the sense of risk associated with central bankers later in the day,
Nonetheless, the data was boosted by a 22% jump in orders for motor vehicles and parts while the measure of the rise in ex-transportation was more subdued at + 2.4% MoM (+ 2.0% est. MoM before revised to + 4.0% m / m from initial + 3.6% m MoM.
Overall, the data is positive news for the sustainability of the recovery. Also during the session, there were comments from George and Barkin of the Fed.
Disinflationary pressures, along with uncertainty over COVID-19’s trajectory and recovery, were the main themes leading up to the Jackson Hole later in the day.
The China Sea on the back burner for the moment
Meanwhile, the risk climate was positive, with markets examining lingering tensions between the United States and China overnight, with China firing two missiles into the South China Sea as part of military exercises.
This may be a theme that will come back to quite quickly, especially if tensions escalate further after the tightening of US sanctions against companies seen as supporting China to “reclaim and militarize contested outposts,” according to the US Department of Commerce.
Instead, for the draw, investors betting on large-cap Wall Street companies to continue rising, supported by the stimulus, bring us nicely to the Jackson Hole preview and an event that kept l appetite for risk at a sustained level.
The Jackson Hole
The Fed’s policy framework, which should be at the heart of the speech at Powell’s symposium, is what the markets will agree to.
Speech by Powell at the start of the Kansas City Fed’s annual economic symposium. His talk is titled “Monetary Policy Framework Review” (11:10 pm Syd / 9:10 pm Sing), or 14.10GMT.
ANZ Bank analysts explained that the market is looking to see if and how policy tools could be tailored to meet an average inflation target that has so far been open to speculation.
“For example,” analysts say, “QE could become conditional on macroeconomic and inflationary developments, or date-dependent. But the result is that adjusting an average inflation target would undoubtedly be seen as accommodating, which means looser monetary policy for longer. ”
An average inflation target would mean that the Fed would be willing to tolerate an inflation overrun to compensate for an overrun that had occurred over a certain (limited) period of time.
In the current environment, this would anchor inflation expectations, lower real interest rates and lead to expansionary policy longer than otherwise.
Therefore, analysts have made it clear what is positive for risk and negative for the dollar.