The Federal Reserve's annual conference, organized by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming, began yesterday with a dinner for central bank leaders, economists, and journalists who arrived from around the world.
Here's what to expect from the three-day meeting:
Chair Jerome Powell will deliver his speech today. This address is likely to be the main event of the conference.
Fed watchers and investors will closely monitor any hints about what policymakers may decide at their September meeting. The U.S. central bank may be ready to cut interest rates again after holding them steady this year to assess the impact of tariffs on the economy. During his speech, Powell may indicate whether his colleagues lean one way or another. With inflation above the Fed's 2% target and hiring slowing, officials remain divided on when rate cuts might be appropriate.
This division within the regulator creates additional uncertainty for markets, and Powell's remarks are expected to clarify the Fed's next steps. Investors and analysts will scrutinize every word from the Fed Chair, seeking clues about the future direction of monetary policy. Particular attention will be paid to his assessment of the current economic situation and inflation outlook. Any signals of readiness for more aggressive measures to contain inflation could trigger a new wave of market sell-offs, while signs of a softer stance may instead spark optimism and an inflow of investments.
Geopolitical factors should also not be overlooked, as they influence the Fed's decisions. White House interference in Fed affairs, trade wars, and other developments could shift economic forecasts and, consequently, monetary policy adjustments. Under such conditions, Powell will need to demonstrate not only economic expertise but also political acumen to preserve financial stability and support economic growth.
Market pricing shows that investors expect a rate cut in September, followed by at least one more this year. President Donald Trump, a frequent Fed critic, again this week demanded significant cuts from Powell and his colleagues, while some administration officials are calling for a substantial half-point reduction next month.
Powell's speech is also expected to touch on the Fed's review of its so-called framework program. Policymakers are projected to make certain changes to this document explaining how the Fed seeks to achieve its inflation and employment goals, particularly by undoing some modifications introduced in 2020.
Although the main program does not include speeches by regional Fed presidents or other officials, all 18 current policymakers are listed among the participants, and many will give media interviews. Today, Boston Fed President Susan Collins is scheduled for an interview. On Saturday, a panel discussion will feature Bank of England Governor Andrew Bailey, European Central Bank President Christine Lagarde, and Bank of Japan Governor Kazuo Ueda, who will discuss the policy implications of the conference's theme — labor markets in transition.
The decisions and statements made today may set the tone for the currency market's next direction. A dovish Fed stance would weaken the U.S. dollar, pushing risk assets to new monthly highs. Conversely, a more hawkish tone could give the dollar at least a short-term boost.
Technical outlook for EUR/USD: Buyers now need to regain the 1.1600 level. Only then will a move toward testing 1.1630 be possible. From there, the pair could climb to 1.1658, though doing so without support from large players will be rather difficult. The most distant target is the 1.1690 high. If the instrument declines, I expect significant buyer activity only around 1.1565. If no major demand appears there, it would be better to wait for a retest of the 1.1530 low or consider opening long positions from 1.1490.
Technical outlook for GBP/USD: Pound buyers need to take the nearest resistance at 1.3420. Only this will open the way toward 1.3450, above which breaking through will be rather difficult. The most distant target is the 1.3480 level. If the pair falls, bears will try to take control of 1.3380. Should they succeed, a breakout of this range would seriously damage the bulls' positions and push GBP/USD down to the 1.3346 low, with prospects of extending toward 1.3305.
