The potential for tomorrow’s Jackson Hole symposium speeches to give new guidance on the Eurozone and US monetary policy outlooks is keeping the EUR USD exchange rate on the decline this morning.
The Euro US Dollar pairing has fallen -0.2% to 1.1788 so far today.
Euro Declines as Markets Await Tomorrow’s Speech from ECB President Draghi
Some positive data from the Eurozone this morning hasn’t been sufficient to distract the markets from tomorrow’s key speech by European Central Bank (ECB) President Mario Draghi.
French business confidence figures for August have beaten forecasts; although the sentiment index for July was revised lower by one point to 108, this month’s above-expectations figure has more-than-compensated for this by rising to 111.
Meanwhile, finalised second-quarter GDP figures for Spain have confirmed that the Spanish economy grew by a respectable 0.9% quarter-on-quarter and by 3.1% year-on-year.
The focus remains on monetary policy, however.
Draghi is scheduled to speak at 19.00 GMT tomorrow – although sources from the ECB have recently warned that he will not be using this time to discuss Eurozone monetary policy, investors are nonetheless hoping for clues regarding the potential for adjustments to the quantitative easing programme this autumn.
If not discussing monetary policy, there is a good chance Draghi will repeat his call for governments to do more to aid in stabilising and boosting their economies; he has often claimed that monetary policy has its limits and implored lawmakers to do more with fiscal policy to encourage growth.
Markets may take this as a sign that Draghi thinks the ECB is reaching the bottom of its policy ‘toolbox’, which could harm EUR USD.
US Business Leaders Voice Support for Tax Reform; USD Holds Ahead of Jackson Hole Speech
Despite the many uncertainties and downside factors weighing on the US Dollar, hope that Federal Reserve Chair Janet Yellen will deliver a confident message tomorrow at the Jackson Hole symposium is keeping the ‘Greenback’ afloat this morning.
Odds are firmly on the Federal Reserve leaving rates frozen for the rest of the year, with a 60.4% chance on the Fed Funds futures market of no hike taking place in December.
However, USD is being supported by indications US businesses are likely to provide vocal support for President Donald Trump’s tax reform bill, improving the odds of it being passed in Congress.
Republicans and bill co-authors Paul Ryan and Kevin Brady are currently touring the US, visiting businesses in an attempt to generate support for Trump’s efforts to reform tax when the summer recess for lawmakers ends.
So far, it seems that businesses are largely in favour of the idea of reforms.
Boeing CEO Dennis Muilenburg commented; ‘Boeing supports comprehensive tax reform proposals that encourage companies to invest and locate quality jobs and manufacturing in the US and that will raise the standard of living for all Americans and grow the US economy.’
Meanwhile a statement received by FOX Business on Wednesday from UPS reads; ‘UPS supports tax reform because we believe it will stimulate the economy, create jobs and provide a globally competitive tax structure for US companies.’
Leaders from Intel and AT&T have also voiced their support.
EUR USD Exchange Rate Forecast to See Little Volatility from US Jobless Claims Data
With the potential for a big shake up to the monetary policy outlooks of both the Eurozone and the United States tomorrow, it is unlikely markets will pay much heed to today’s US data releases.
Initial and continuing jobless claims and existing home sales figures are the most impactful data on the calendar today, but these will struggle to make an impact, unless something drastic were to happen with the data.