DailyFX.com -

Talking Points:

  • Markets Brace for Impact as Central Bank Top Brass Gather in Jackson Hole
  • Pound Most Prone to Big-Splash Volatility After Weeks of Aggressive Selling
  • Follow the Kansas City Fed Symposium on the DailyFX Real Time News Feed

A lull in fundamental event risk in Asia and Europe has left currency markets rudderless, with investors looking ahead to the Kansas City Federal Reserve Economic Symposium getting underway today in Jackson Hole, Wyoming. The annual gathering is a star-studded affair this time around, with the keynote speech to be delivered by Fed Chair Janet Yellen and scheduled appearances from ECB President Mario Draghi, BOJ Governor Haruhiko Kuroda, BOE Deputy Governor Ben Broadbent and BOC Governor Steven Poloz.

A gathering of so many policy heavy-hitters in one place all but guarantees that someone will invariably say something market-moving at some point before the affair is through. Needless to say, traders will be all ears. While it is impossible to precisely predict just what will be said and how it might impact exchange rates, filtering the established trajectory of monetary policy in the world’s leading economies through recent price action offers a useful layout of the probable scenarios.

The top four central banks can be grouped into two camps: those inching toward reducing stimulus and those that might expand it. The Fed and the BOE are in the former camp, while the BOJ and the ECB are in the latter.

While the US Dollar trades near a six-month high, the British Pound is working on the seventh consecutive week of losses. This means that for the greenback, there is confluence between overall direction of policy (i.e. a movement away from the dovish extreme of the policy spectrum via “tapering” of QE asset purchases) and the latest price action. Not so for Sterling: continued selling stands in contrast to seemingly supportive news-flow by way of a relatively hawkish set of minutes from Augusts’ policy meeting.

Central bankers are a stolid bunch and typically try to avoid bombastic rhetoric that might spook the markets, particularly at a wonky get-together like the Jackson Hole Symposium. That means Ms Yellen and her counterparts will probably seek to stay relatively “on-message” vis-à-vis existing policy trends.

This hints that the risk of big-splash volatility is comparatively lower for the US unit, where prices have already moved in a significant way to reflect the cautiously hawkish implications of recent developments. Similarly status-quo remarks from the BOE contingent would clash with recent Pound moves, meaning the threat of a sharp rebound may be asymmetrically greater than that of another big push downward.

Turning to the dovish grouping, the BOJ Governor seems less likely than otherwise to deliver another aggressive decline in the Japanese Yen considering prices plunged to five-month lows just this week. If a big swing in the exchange rate is to materialize, it seems disproportionately probable that such a move would take the currency higher. The same goes for the Euro after the single currency sank to an 11-month low.

New to FX? START HERE!

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

No Data

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

No Data

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.3178

1.3224

1.3253

1.3270

1.3299

1.3316

1.3362

GBPUSD

1.6508

1.6545

1.6562

1.6582

1.6599

1.6619

1.6656

Related Articles
  1. Chart Advisor

    Watch This ETF For Signs Of A Reversal (BCX)

    Trying to determine if the commodity markets are ready for a bounce? Take a look at the analysis of this ETF to find out if now is the time to buy.
  2. Mutual Funds & ETFs

    ETFs Can Be Safe Investments, If Used Correctly

    Learn about how ETFs can be a safe investment option if you know which funds to choose, including the basics of both indexed and leveraged ETFs.
  3. Mutual Funds & ETFs

    The Top 5 Large Cap Core ETFs for 2016 (VUG, SPLV)

    Look out for these five ETFs in 2016, and learn why investors should closely watch how the Federal Reserve moves heading into the new year.
  4. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  5. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  6. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  7. Chart Advisor

    These 3 ETFs Suggest Commodities Are Headed Lower (COMT,CCX,DBC)

    The charts of these three exchange traded funds suggest that commodities are stuck in a downtrend and it doesn't look like it will reverse any time soon.
  8. Trading Strategies

    4 ETFs To Trade the Russian Ruble (RSX, ERUS)

    Discover which exchange-traded funds (ETFs) provide investors with the greatest exposure to the Russian ruble and learn about the risks that come with each.
  9. Chart Advisor

    3 Charts That Suggest Now Is The Time To Invest In Real Estate (VNQ, SPG,PSA)

    Real estate assets have some of the strongest uptrends around. We'll take a look at three candidates poised for a move higher.
  10. Products and Investments

    Are Dividend Stocks a Good Substitute for Bonds?

    Are dividend paying stocks a good substitute for bonds in a low interest rate environment?
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center