NewsEbury: Powell dovish Jackson Hole speech fails to boost dollar

The key event of last week was as expected the Jackson Hole conference of central bankers. Read the FX market analysis.

Powell’s generally dovish speech sent most major currencies higher against the US dollar, as it suggested that the Fed Chair remains unconcerned by the recent spike in inflation and is in no hurry to remove accommodation, let alone raise rates. Risk assets rose in response, led as usual by equities and commodities, the dollar fell and emerging market currencies benefited.

While the tone of Powell’s speech was undoubtedly dovish, it did validate market expectations that the tapering of purchases of securities by the Fed will start before year-end. The timing and speed of this taper will be driven by inflation and job market data and the internal debate within the Fed, which we expect will become more heated soon. This week’s US payroll report will be the key to the outcome of the September FOMC meeting.

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