Intraday Market Thoughts

Unpredictable Jackson Hole

by Adam Button
Aug 24, 2017 23:27

Low expectations for the annual central banker gathering in Jackson Hole in the days ahead set the stage for a surprise. The Canadian dollar was the top performer on Thursday while the yen lagged. Japanese CPI data is due up next. The video for Premium members, focusing on the existing 5 trades and upcoming ideas is below.

Market moves were minimal on Thursday and EUR/USD was locked into a 35-pip range as the market braces for speeches from Yellen and Draghi at Jackson Hole. Other central bankers will be added to the agenda at the annual symposium.

Most of the commentary this week has been dismissive of the speeches from Yellen and Draghi. The topic of Yellen's 10 am ET Friday speech is financial stability, which is sometimes a code word for regulation. Lately, however, the Fed has started to debate whether it's worth raising rates to curb financial risk, even if inflation isn't forecast. If that's the thrust of Yellen's speech, and especially if she argues that it would be prudent to hike in order to curb some excesses in markets, then she could catch the market by surprise.

A week ago, the stakes for Draghi were higher because he was expected to announce, or at least hint, that an ECB taper was coming soon. That plan was scrapped because the ECB has grown increasingly concerned about euro strength, especially with supposed global coordinated tightening failing before it ever got started. However, in the past few months even the smallest hints of tightening have led to major market moves. He could avoi monetary policy, but at least mention the obvious --the growth upswing in the Eurozone.

If the euro sells off, the dip may be short-lived because many market participants are absolutely convinced that it's only a matter of time until the taper announcement comes. So even if Draghi manages to hold the euro down, it's like holding a ball underwater, it's only a matter of time until it pops.'s last 7 trades in EURUSD have each attained a gain of 130-280 pips. The current trade is also in the green.

The yen is likely to be a passenger as it's whipped around by the risk trade on Friday. But before the meetings begin it will briefly have the spotlight with July CPI data due at 2350 GMT. The consensus is for a modest 0.4% y/y rise in the national CPI and just a 0.1% y/y rise in the CPI ex food and energy.

Act Exp Prev GMT
National Core CPI (y/y)
0.5% 0.4% Aug 24 23:30
Fed Chair Yellen Speaks
Aug 25 16:00
Eurozone ECB President Draghi Speaks
Aug 25 19:00

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