Jackson Hole to be a non-event
After a soft start yesterday evening with comments from Fed’s George and Kaplan, who took opposite side about the highly discussed inflation issue, Janet Yellen and Mario Draghi will have the opportunity to present their views. We anticipate that Janet Yellen won’t take any risk and should come with a rather neutral stance, meaning that she’ll leave the door open for a tightening move before the end of the year, while at the same time maintaining a cautious tone in response to weak price pressures. However, keep in mind that the Fed Chair will talk about financial stability, which give her plenty of room to avoid any hot topic. There is great chance is will be a non-event.
However, Mario Draghi will have the difficult task to talk down the euro, which has surged substantially over the last weeks – the single currency reaching 1.1910 against the USD on August 2nd before stabilising at around 1.17 – while preparing the market for the end of the ECB’s quantitative programme. Indeed, the ECB’s September meeting is just around the corner and Draghi won’t have much opportunity to prepare at best investors.
The bottom line is that we expect the Jackson Hole Symposium to have much effect on the EUR and USD crosses. EUR/USD continues to trade within the 1.1662-1.1910 range. We still believe that maintaining a downside bias is the best choice.
