Dollar, euro, sterling await Powell's Jackson Hole speech

[August 27, 2021]  By Joice Alves

Milan (Reuters) - The dollar, euro and sterling steadied on Friday as investors waited for a highly anticipated speech by Federal Reserve Chair Jerome Powell, with analysts now doubting the central bank's boss will hint when he may start to trim asset purchases.

The dollar index, which measures its performance against a basket of six major currencies, was little changed at 93.034 at 1105 GMT. The euro and sterling were also steady at $1.1759 and $1.3707, respectively.

The market was focused this week on what signals the U.S. central bank could send at its annual Jackson Hole conference, which kicked off on Thursday in virtual format, with Powell's speech on Friday its main event.

The conference has been often used by Fed bosses in the past to provide guidance on future policy.
 

Analysts doubt Powell will signal when the Fed may start to cut its asset purchases just yet. The prevailing market view is that the Fed will announce tapering in the fourth quarter, giving a clear signal at one meeting before the actual announcement.

But any move away from "a more cautious approach" could boost the dollar, said Thu Lan Nguyen, currency analyst at Commerzbank.

"I see the risks today in a stronger dollar, should Powell possibly make a more hawkish statement on tapering than generally expected after all," she said.

Regional Fed chiefs - Dallas' Robert Kaplan, Kansas City's Esther George and St. Louis' James Bullard - downplayed on Thursday the impact of the Delta coronavirus variant in separate interviews. Bullard repeated his call for the Fed to start trimming its $120 billion monthly bond purchases.

 

A U.S. Dollar banknote is seen in this illustration taken May 26, 2020. REUTERS/Dado Ruvic/Illustration

Benchmark 10-year Treasury note yields were last at 1.3425%, after reaching 1.375% following Bullard's comments, the highest since Aug. 12.

Overnight, the safe haven dollar got some support after a suicide bomb attack at Kabul airport.

"There are worries events in Afghanistan could erode public approval of the Biden administration," said Toshiya Nakamura, chief manager of forex at Mitsubishi UFJ Trust Bank.

The New Zealand dollar dipped slightly after Prime Minister Jacinda Ardern announced that a lockdown against COVID-19 in Auckland is likely to remain in place for another two weeks.

The Swedish crown was flat at 8.7070 after mixed economic data.[nL8N2PY1J1]

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(Reporting by Joice Alves, Hideyuki Sano, additional reporting by Tomo Uetake; Editing by Shri Navaratnam, Kim Coghill, Mark Heinrich and Tomasz Janowski)

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