FX Focus: Turkey in the Spotlight Ahead of Jackson Hole Symposium

FX Daily: Attention turns to Turkey

Ahead of tomorrow's main event of the week – speeches at the Fed's Jackson Hole symposium – attention today will turn to Turkey. In focus will be whether the Central Bank of Turkey accelerates its policy tightening in a return to a more orthodox policy. Consensus suggests probably not. Elsewhere, the dollar should remain steady, with jobs in focus.

 

USD: Focus on the jobs market

The dollar and US yields were knocked off their highs yesterday as an annual benchmark revision (up to March 2023) deducted 306,000 from the reported US payroll growth figures. Several expectations had in fact looked for a 500,000 reduction. The market reaction (a 10bp drop in the US yield curve) looked a little exaggerated but perhaps proves a reminder that the employment story is the most important US variable right now. In other words, US disinflation is welcome, but if the unemployment rate remains at its lows and consumption stays strong, inflation may never make it back to 2% on a sustainable basis.   

For that reason, look out for the weekly initial jobless claims data today, where any tick higher to the 250,000 area could slightly weigh on US yields and the dollar. We would not expect big moves, however, before Federal Reserve Chair Jerome Powell's 1605CET speech tomorrow at the Fed's Jackson Hole symposium.

Given that the risk environment is a little better bid today – with Nvidia's results keeping the tech boom alive – DXY could trade slightly offered in a 103.15 to 103.50 range.