What will Powell say and where will the market move next?
“The August PMI data signaled further warning signs for the health of the US private sector. Demand conditions deteriorated again, driven by the impact of higher interest rates and strong inflationary pressures on consumer spending, which weighed on activity," S&P Global Market Intelligence commented on weak macro data released earlier this week from the US, which heightened concerns about the recession.
Investors and buyers of the dollar are hoping to hear more tough statements from Jerome Powell today regarding taming high inflation in the US. At the very least, the minutes of the July meeting of the Fed, published earlier this month, confirmed the intention of its leadership to fight inflation resolutely, including by consistently tightening monetary policy. And this is an argument in favor of further strengthening of the dollar.
At the same time, Powell will have to say something in favor of the "hawks" regarding the prospects for monetary policy, and not scare buyers of stock market assets too much. It will not be easy for him to sit on two chairs in the face of a sharp increase in energy prices, inflation and geopolitical tensions in the world, as well as high risks of recession in the United States and in the world.
Characteristically, on the eve of Powell's speech, the S&P 500 broad market index stabilized at a kind of balance line expressed by EMA200 on the daily S&P 500 chart, passing through 4186.00 mark. Obviously, having received a new impetus from Powell's statements, both the dollar and the major US stock indices will move in one direction or another. The most likely resumption of growth of the dollar and the decline of the S&P 500.
Recall that the start of Powell's speech at the annual economic symposium in Jackson Hole is scheduled for 14:00 (GMT), and the closer it is, the less active traders become.
The DXY dollar index, meanwhile, declined in the first half of the trading day, moving towards yesterday's and intra-week lows at 107.95. As of this writing, DXY futures are traded near 108.20 after hitting a new high since October 2002 at 109.20 earlier this week.