FX Daily: Risks skewed towards a stronger dollar in Jackson … – MENAFN.COM

FX Daily: Risks skewed towards a stronger dollar in Jackson … – MENAFN.COM

(MENAFN - ING) We expect the dollar to find some support if Powell simply endorses the prospects of a fall tapering as the Delta-variant impact is somewhat downplayed. The risks of a de-linking between tapering and tightening prospects are quite material now, but given the non-aggressive pricing for Fed hikes, this should limit, but not invert, any dollar rally. The dollar has recovered some losses in the two days leading to Fed Chair Powell's speech at Jackson Hole scheduled for today at 15:00 BST, although we suspect the vicinity to such a big risk event will keep volatility in major FX crosses extremely subdued in the hours before the speech. While the Jackson Hole Symposium will dictate most market movements today, it will still be worth keeping an eye on Afghanistan given the rapid deterioration in the security situation in Kabul. In summary, the FX reaction to Powell's remarks will likely depend on his tone on: a) the US economic growth in light of the Delta-variant spread; b) the timing and length of tapering; c) any guidance on when the hiking cycle will start. On the first point, the spectrum of likely outcomes span from a very concerned tone on