European Summary and Highlights 23 August

Europe Session

USD moved sideways in Europe, as traders want to wait for Powell comments at Jackson Hole.  A more dovish view than recently is expected, including hints of a September cut.  However, traders are uncertain about whether Powell will be super dovish (endorsing ideas of 100bps of cut by year-end) or leaning against ideas of 50bps in September.  The FX market is seen reacting if any of these views occur.  GBP did push higher in technical trading.

JPY gains in Asia were partially reversed in Europe, but European traders also taking the view that BOJ Ueda left the door open to future rate cuts.  Chart based traders also noted that the USD bounce last week failed and the multi week bias is to test 142 and 140 on USDJPY. 

Meanwhile, expectations on ECB and BOE rate cuts continue to diverge causing some movements on EURGBP recently.  The July ECB accounts, plus ECB Rehn comments, suggest that the ECB is preparing to cut by 25bps on Sep 12 and the market is then discount a further cut in December and a 50% probability of a cut in October.  With low expectations of a BOE cut in September, it could be UK data or speeches that change relative expectations.  BOE Bailey is speaking at Jackson Hole today at 4pm and will be watched for clues.