August 19, 2024 at 08:43PM
Bank of America expects the upcoming Jackson Hole symposium to be a pivotal moment for US rates, with Fed Chair Powell likely signaling a future rate cut while maintaining flexibility. The risks, however, lean toward a more hawkish tone, potentially strengthening the USD.
Key Points:
Jackson Hole Focus:
The symposium is expected to be a key event for determining the direction of US rates.
Fed Chair Powell is likely to indicate that the next move will be a rate cut, but will also emphasize flexibility depending on future economic data.
Powell’s Expected Stance:
Powell is expected to avoid committing to specific actions, instead keeping all options on the table (“not ruling anything in or out”).
This cautious approach allows the Fed to respond dynamically to evolving economic conditions.
Potential Market Impact:
The impact on the USD might be limited if Powell maintains a balanced approach.
However, the risks are skewed toward more hawkish communication, which could lead to higher US rates and a stronger USD.
Any indication that large rate cuts are off the table could also contribute to a risk-off sentiment, further boosting the USD.
Conclusion:
BofA sees the potential for a more hawkish tone from Fed Chair Powell at the Jackson Hole symposium, with a focus on retaining flexibility in future rate decisions. This could lead to higher US rates and a stronger USD, especially if Powell avoids signaling an imminent rate cut or downplays the likelihood of large cuts.
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This article was written by Adam Button at www.forexlive.com.
