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USD faces credibility risk after Jackson Hole event focus

TD Securities expects rate expectations to stay anchored, but warns that failure to reaffirm the Fed's inflation mandate could weigh on the dollar near term.

Reported · Written up by our desk · Central Banks

TD Securities says the upcoming Jackson Hole meeting is likely to matter for USD primarily through Federal Reserve credibility rather than fresh guidance. The firm expects US rate expectations to remain relatively anchored, limiting the odds of a sustained directional move in the dollar.

The main risk, according to TD Securities, is whether Fed Chair Warsh will reaffirm the inflation mandate. Any attempt to “clear the air” on inflation credibility is seen as only modestly supportive, while unresolved concerns about the Fed’s inflation-targeting credibility could continue to pressure USD.

The outlet characterizes the near term risk skew as modestly USD-negative. Separately, FXStreet notes that EUR/USD remained under pressure and that USD behavior is also tied to investor assessment of Middle East developments, including Iran-related sanctions headlines.

Latest closeEUR/USD 1.157 ▲0.4%

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