Is Donald Trump satisfied with Jerome Powell’s speech? Probably, yes. The Fed chairman signaled a change in monetary policy, causing the S&P 500 to rise and the US dollar to fall. Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- A weak labor market will slow inflation.
- The Fed is going to cut rates.
- Reversal risks signal the dollar’s decline.
- Long trades on the EURUSD pair can be considered with the targets of 1.2 and 1.22.
Weekly US Dollar Fundamental Forecast
The strongest steel is forged by fire. Has Jerome Powell failed to go through the fires, or is the economic situation really developing in a way that makes high interest rates a burden? At the Jackson Hole symposium, the Fed chairman’s speech allowed investors to buy plunging US stock indices and further damaged the US dollar. The EURUSD pair soared above 1.17 and will likely resume its upward trend.
Jerome Powell changed the Fed’s cautious approach. He said the labor market’s weakness would offset the impact of tariffs on inflation and provide grounds for adjusting monetary policy. Deutsche Bank dubbed this “cut once, then see what happens” approach. Bloomberg believes that the July PCE surge, coupled with strong August labor market data, could undermine investor confidence in the resumption of monetary expansion.
US Nonfarm Payrolls and Inflation
Source: Bloomberg.
The Fed chair’s new concept strikes a balance between the hawks and doves on the FOMC, thereby smoothing out divisions within the Committee. This development paves the way for a sustained period of reduced interest rates. Judging by Jerome Powell’s remarks, it appears that this will be a prolonged process, rather than a hasty one. As the employment situation worsens, the Fed will have arguments for continuing its cycle of monetary expansion.
The US labor market has experienced both positive and negative developments. The unemployment rate is stable, and employers are not expressing interest in laying off staff. Unfortunately, they are also not eager to hire additional personnel. As a result, a small number of layoffs could potentially lead to a significant increase in unemployment. The ongoing issue of unemployment is likely to persist, and this may coincide with a recession.
What is Donald Trump’s opinion of Jerome Powell’s speech in Jackson Hole and the market’s reaction to it? The US leader has increased pressure on the Fed, indicating his intention to consider dismissing Lisa Cook from her position as FOMC governor for alleged mortgage fraud. The US administration’s objectives include lowering interest rates, stimulating the US economy, and increasing his ows approval rating. To achieve this objective, a variety of approaches may be considered, and the FOMC officials should either comply or resign.
US Dollar Risk Reversals
Source: Bloomberg.
Has Jerome Powell given up? Investors who were preparing to return to the US dollar in anticipation of the Fed chairman’s speech to central bank governors have significantly revised their perspectives. Prior to the Jackson Hole event, the potential for a greenback reversal had increased to a one-month high. However, there is a risk of a sudden decline due to an impending adjustment in the FOMC’s monetary policy.
Weekly EURUSD Trading Plan
Investors are optimistic about the continued growth of the EURUSD rate. In this connection, the EURUSD pair can be purchased on pullbacks with the previously identified targets of 1.2 and 1.22.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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