USD
finished Thursday little changed, despite hawkish commentary from regional Fed presidents Schmid and Hammack, the latter arguing that “now is the time to act” on sticky inflation, keeping September hike odds alive at roughly 35%. Still, Jackson Hole remains the focus, with Chair Warsh’s first keynote at 15:00 BST today. As we have argued previously, his aversion to forward guidance means that hopes for an explicit steer on policy direction are likely to be disappointed, leaving two-way risk for the dollar. We see those risks asymmetrically, however, with downside the more probable outcome. Specifically, we suspect his comments will likely be read in the context of Treasury Secretary Bessent’s intervention last week to weigh on long-term yields. That leaves dollar debasement concerns front of mind, and a lack of pushback from the Fed Chair risks being interpreted as an endorsement by traders.
EUR
has traded range-bound for much of the week, slipping only modestly against the firmer dollar to sit in the mid-1.16s as of writing, finding little support from ECB minutes yesterday, despite a tone that leaned hawkish at the margin. This morning’s French and Spanish flash CPI prints for August are the domestic highlight, alongside French GDP, albeit none have proved significantly market-moving, largely matching expectations. As such, the single currency’s direction today will ultimately be set in Wyoming. A non-committal Warsh likely leaves the euro’s recent range intact, with 1.17 the level to watch if dollar debasement concerns emerge.
GBP
consolidated just shy of 1.36 yesterday, trading on external drivers with no domestic prints of note. Granted, politics remains an overhang: Parliament returns next week, and markets are still awaiting clarity on the new Prime Minister’s fiscal plans ahead of the Autumn Budget. For today, however, cable is hostage to Warsh’s keynote in Jackson Hole. Our bias skews toward modest gains, but with plenty of uncertainty around the Fed Chair’s likely comments, our conviction is low beyond anticipating greater volatility.
CAD
The loonie managed to claw back some ground on Thursday, with slipping toward the mid-1.38s despite US-Canada trade tensions showing few, if any, signs of cooling. Today brings Q2 GDP at 13:30 BST, with consensus looking for a robust 3.4% annualised expansion after three contractions in the previous four quarters. A strong print may offer only fleeting relief, however, given the tariff drag is concentrated in the second half of the year. Moreover, given elevated expectations, we see greater scope than usual for the data to undershoot consensus. With Warsh’s keynote landing shortly after, a hawkish commentary combined with soft data could put the 1.39–1.40 region firmly in play, though given our expectations for the Fed Chair, we are inclined to see risks skewed marginally lower ahead of the weekend.
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