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Jackson Hole conference begins

USD - United States Dollar

Finally the most important event of the week, the Jackson Hole conference, begins and it is almost as if the FX markets and investors have woken up. The annual conference will see Jerome Powell, Andrew Bailey and Tiff Macklem (the new Bank of Canada Governror) all speak. Powell's message in particular will be critical for investors as he is expected to confirm that the Fed will shift its inflation goal towards an average inflation target. This means, in theory, that the Fed could allow inflation to pass 2% before adjusting policy which would lead to continued dollar weakness. There is a big disconnect in the US economy at the moment with the S&P and NASDAQ at record highs whilst consumer confidence is at 6 year lows. We also have the weekly jobless claims data today as well which could further underwrite the view that equities and jobs are pulling in opposite direction. If Powell takes a dovish approach this afternoon and we see a pick up of unemployment claims above 1m again then the USD could weaken off against high beta currencies again.

Key Movers

Interestingly the Euro weakened off yesterday in the face of continued rising virus cases across the continent. Europe finds itself in a different position to the US in the sense that it has come together to provide huge stimulus and grants to countries stricken by the virus but there are suggestions among investors that the rally seen of the back of this may have stalled. EUR/USD had a run at 1.20 the other week but fell short and since then we have seen a 1 cent drop.

Expected Ranges

GBP/USD: 1.3060 - 1.3250 ▲

GBP/EUR: 1.1060 - 1.1180 ▲

GBP/AUD: 1.8160 - 1.8280 ▼

GBP/CAD: 1.7220 - 1.7380 ▲

GBP/NZD: 1.9900 - 2.0250 ▼