EUR/USD Hangs in Balance Ahead of Warsh's Jackson Hole Speech
The EUR/USD has been trending lower this week as investors await the keynote speech of Kevin Warsh at the Jackson Hole summit, due later today. This trend may be reversed if Warsh convinces the market that they can control inflation and flatten the yield curve.
Warsh's speech will likely determine whether the dollar remains under pressure or recovers its ground from last week's sell-off triggered by bond market worries. Investors are still weighing up the US Treasury's decision to boost long-dated bond buying against high oil prices and sticky inflation signs.
The 'dollar debasement trade', where precious metals and cryptocurrencies like Bitcoin outperform the greenback, hasn't gone away yet. Gold and Bitcoin have consolidated recent gains, while currencies of countries with better fiscal discipline such as the Norwegian Krone and Swiss franc remain near recent highs against the US dollar.
Unless yields start to head decisively lower, the pressure on the US dollar is likely to persist, making investors prefer the euro over the US dollar. The EUR/USD's falling wedge pattern suggests a potential breakout above resistance could see it re-test recent highs near 1.1700.