Pound dips ahead of Powell speech

The British pound continues to have a relatively quiet week. GBP/USD is currently trading at 1.3728, down 0.28% on the day.

All eyes on Powell speech

Fed Chair Jerome Powell will be the center of attraction at the Jackson Hole Symposium, which has not been spared from the ravages of Covid-19. The meeting will be held virtually and has been scaled back from two days to just one day due to Covid.

Powell’s highly-anticipated speech on Friday could also be heavily influenced by the pandemic, which is on an upswing across the world and threatens the tenuous recovery. Just a few weeks ago, it was almost a given that a Fed taper was imminent, and that policy makers would provide a roadmap of an imminent tapering. However, with the explosion in infection rates from the Delta Covid variant, the markets have since lowered expectations and caution is the operative word ahead of the meeting. The FOMC minutes from the July meeting showed that policy makers remain divided on the timing of tapering – most members are behind a tapering this year, but some want to wait until 2022. What Powell says (and doesn’t say) on Friday could have a significant impact on the movement of the US dollar – a hint of a timeline would be bullish for the US dollar, while a speech that steers clear of any insight into tapering could translate into disappointment and weigh on the US dollar.

The markets now expect Powell to provide details of tapering at the September policy meeting, with the Fed likely to kick off tapering before the end of the year.

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GBP/USD Technical Analysis

• There is resistance at 1.3800. Above, there is resistance at 1.3977
• On the downside, 1.3659 is the first line of support. This is followed by support at 1.3524

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