Euro drifting ahead of Powell speech

After a strong start to the week, the euro has been quiet. The lack of movement is continuing on Friday, as EUR/USD is trading at 1.1759, up 0.06% on the day.

Markets cautious ahead of Powell

The Jackson Hole Symposium is usually a hobnob of central bankers and other key officials, but the pandemic has rained on this year’s party. The event has been scaled down from two days to just one, and the meeting will be virtual in order to comply with health restrictions. Still, the star of the show, Fed Chair Jerome Powell, will deliver a speech to the markets, and his comments will be reviewed with a fine-tooth comb. Investors are cautious ahead of the speech, as US data has become softer and the Covid Delta variation is weighing on the market’s nerves.

Ahead of Powell’s speech, three Fed members urged the Fed to speed up its plans to taper its bond purchases. The three members, Robert Kaplan, James Bullard and Esther George, are non-voting members in 2021 and are known as hawks. Powell will likely be more cautious than the threesome were in their TV interviews this week and may lay low and not say very much today. This will give the Fed more time to analyse economic data ahead of the September policy meeting.

In Europe, the ECB minutes from the July policy meeting indicated that the ECB’s revised forward guidance was not unanimous. Most members supported the new guidance, which states that the ECB will not raise rates unless there is evidence that inflation will persist “durably” at the two percent target. Inflation has been well below this target for years but is expected to overshoot the two percent level this year. This means that the central bank policymakers are expected to discuss at the September meeting the timing of a taper of a pandemic emergency bond programme. Still, the ECB is lagging behind the Fed when it comes to tapering and is unlikely to announce any timelines for tapering before December at the earliest.

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EUR/USD Technical

• With the euro showing limited movement, support and resistance levels remain unchanged this week
• There are resistance lines at 1.1779 and 1.1859
• On the downside, we find support lines at 1.1642 and 1.1585

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