Pound US dollar exchange rate subdued as Powell addresses Jackson Hole summit
This comes as the Federal Reserve Chair takes to the stage for his long awaited speech at the Fed’s annual Jackson Hole Symposium. Mr Powell’s speech comes amid heightened expectations for a Fed rate cut in July, with an additional cut when the Federal Open Market Committee (FOMC) meets in September. However, at the time of writing, Powell was offering scant insights into the bank’s next policy move, only suggesting the US economy is in a “favourable place” and that the Fed would continue to “act as appropriate”.
Mr Powell did allude to the impact of the US-China trade war: “There are, however, no recent precedents to guide any policy response to the current situation.”
He added: “We can, however, try to look through what may be passing events, focus on how trade developments are affecting the outlook, and adjust policy to promote our objectives.”
Mr Powell’s neutral tone is likely to disappoint President Donald Trump who recently brought the Fed to task over their failure to lower interest rates.
Meanwhile, Sterling surged higher on Thursday on renewed hopes for an alternative to the Irish backstop. A potential glimmer of EU concession in the Brexit withdrawal agreement was sparked when German Chancellor, Angela Merkel suggested a compromise could be reached by 31 October.
But the pound’s incline proved short lived as a bout of profit taking undermined the currency on Friday.
Looking ahead to next week’s session, with a scarcity of UK economic data, Brexit is likely to hold centre-stage as the main catalyst for Sterling movement.
However domestic politics may also exert further influence on the pound next week with opposition parties expected to accelerate their plans for a vote of no-confidence in Boris Johnson ahead of Parliament reconvening in September.
Meanwhile, USD investors are likely to focus on emerging US-China trade news, with markets braced for US retaliations against Beijing’s latest tariff move.
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