The euro was still at the top of the relatively narrow band from $ 1.1650 to $ 1.1750 on Friday, pending US inflation dates with the report on personal incomes and spending for July. The market is also waiting for a speech by Federal Reserve President Jerome Powell at 4 p.m. this afternoon on the occasion of the virtual Jackson Hole symposium of central bankers.
Powell’s speech will attract all the attention of the foreign exchange market on Friday. This concerns every difference compared to what has been reported by the Fed so far about tapering.
There are two important questions at the symposium: when will the Fed taper and when will the Fed raise interest rates? We think the Fed is going to taper in the fourth quarter, which is in line with what investors and analysts think. However, we believe that the first rate hike will not be until the end of 2023, which is later than what most investors and analysts think. If it turns out the way we see it, this combination will have a negative impact on the dollar.
According to the specialist, investors remain nervous about the rapid spread of the COVID Delta variant and the situation in Afghanistan.
Special attention to the Swiss franc needed. Since the end of March, investors have become less optimistic and government bond interest rates have fallen, first in the US and the UK and later in Germany, and the franc has supported this. Further, investors are still nervous about the rapid spread of the COVID-Delta strain, and the developments in Afghanistan have led to increased demand for safe havens.
As soon as investors become less nervous about the Delta variant and the situation in Afghanistan improves, the franc may fall again and the Swiss central bank is not looking for a stronger currency at all. As early as June, it indicated that the franc is expensive and that it is prepared to intervene in the foreign exchange markets if necessary, while the franc was at a lower level than it is now.
On 7 September, the central bank will publish the figures on foreign exchange reserves in August. If the central bank has intervened, this can be seen in these figures. The central bank’s policy committee will meet on 23 September and one of the topics to be discussed will be the strong franc. We think that the central bank will only raise interest rates after the ECB has done so, which could take years. In short, we expect a fall in the franc compared to the euro..
French consumer confidence in July dropped slightly to 99.
In the United States this afternoon, in addition to income and spending, the preliminary trade balance for July and final consumer confidence for August, as measured by the University of Michigan, are central.
The euro recorded flat on Friday at $ 1,1752. The European currency also recorded unchanged at £ 0.8577. The British pound remained stable at $ 1,3703 on Friday.