Dollar Flat Ahead of Powell Speech, Possible Policy Shift

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Dollar Flat Ahead of Powell Speech, Possible Policy Shift

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The U.S. dollar was stuck in tight ranges last night as the market prepares for a shift from the Federal Reserve this morning.

Overview

Federal Reserve Chairman Jerome Powell is expected to announce that the central bank will take a different tack to promote full unemployment by tolerating higher levels of inflation.  The Fed’s inflation goal has long been 2%, and the economy has mostly undershot that target for the better part of the decade. The shift could mean that interest rates will stay lower for longer, even if inflation ticks higher.  We will get more details when Powell begins speaking at 9:10 a.m.

This morning’s economic data is heavy.  Initial jobless claims registered a touch above 1M last week, mostly in line with expectations and showing vast improvements in the labor market are still a long way off.  Continuing claims were slightly better than expected, but with more than 14 million Americans receiving jobless benefits, its hardly a reason to rejoice.

A separate, revised report showed that the U.S. economy contracted at a record 31.7% annualized rate in the second quarter. This revision is slightly better than the previous reading of a 32.9% drop. Pending home sales are due out at 10 a.m.  Personal spending and the PCE Deflator, the Fed’s preferred inflation reading, are due out tomorrow.

Widespread sporting boycotts in protest of racial injustice, the aftermath of Hurricane Laura in Louisiana, and the ongoing Republican National Convention are all critical stories but are unlikely to dictate the greenback’s direction today.

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