The two have been restricted to a narrow range of 1.1115- 1.1063 since last week. The pair is currently probing the lower edge of the trading range.
A range breakdown, if any could trap sellers on the wrong side of the market if Fed’s Powel sounds dovish.
Fed’s chairman Jerome Powel is expected to give a speech at the symposium on an important gathering of central bankers and economists.
The financial markets are priced for a 25 basis point rate cut in September. At the same time, the markets are also expecting the European Central Bank (ECB) to deliver massive stimulus next month.
So far, the dovish ECB expectations have overshadowed the dovish Fed expectations.
This is evident from the fact that the EUR/USD dropped by more than 180 pips over the last 2.5 weeks. Also, the Fed has been reluctant to signal aggressive rate cuts.
So, the greenback could take a beating if Powell bows down to political pressure by using the Jackson Hole speech to set the stage for aggressive easing in the near term.
In that case, the range breakdown in EUR/USD, if any, could be short-lived.
The common currency, however, will likely end up falling below 1.10 if Powell refrains from signaling additional easing, forcing markets to price out prospects of a September rate cut.
Influential Institutions and People for the Euro/USD
The European Central Bank (ECB)
The European Central Bank (ECB) is the central bank empowered to manage monetary policy for the Eurozone and maintain price stability so that the euro’s purchasing power is not eroded by inflation.
The ECB aims to ensure that the year-on-year increase in consumer prices is less than, but close to 2% over the medium term.
Another of its tasks is one of controlling the money supply. The European Central Bank’s work is organized via the following decision-making bodies: the Executive Board, the Governing Council, and the General Counsel. Mario Draghi, a member of the Executive Board, is also the President of this organism.
The Federal Reserve Bank (Fed)
On the other hand, we found The Federal Reserve System (Fed) which is the central banking system of the United States.
Fed has two main targets: to keep the unemployment rate to their lowest possible levels and inflation around 2%.
The Federal Reserve System’s structure is composed of the presidentially appointed Board of Governors, partially presidentially appointed Federal Open Market Committee (FOMC).
The FOMC organizes 8 meetings in a year and reviews economic and financial conditions. It also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth.
