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EUR/USD Reacts Wildly to Powell’s Speech

August 27, 2020 by

The major event today was the speech of Federal Reserve Chairman Jerome Powell at the Jackson Hole symposium. (Event B on the chart.) Powell signaled that the Fed changed its inflation targeting a bit, aiming now at achieving the 2% inflation goal over a longer term. That means the Fed may allow inflation to run above 2% for a while to offset the below-2% period. Overall, the Chairman did not reveal anything too dramatic and unexpected but that did not prevent the market from reacting wildly to his speech. EUR/USD surged at first but collapsed sharply afterward and is now trading below the opening level. As for US macroeconomic data, it was decent for the most part.

US GDP tanked by 31.7% in Q2 2020 according to the preliminary (second) estimate. It was a slightly better reading than a slump of 32.5% predicted by analysts and 32.9% shown by the advance (first) estimate. GDP fell by 5.0% in Q1. (Event A on the chart.)

Initial jobless claims were at a seasonally adjusted level of 1,006k last week, down from the previous week’s revised level of 1,104k. Analysts had predicted a slightly bigger drop to 1,000k. (Event A on the chart.)

Pending home sales rose by 5.9% in July, exceeding the average forecast of a 2.5% growth. The previous month’s increase got a negative revision from 16.6% to 15.8%. (Event C on the chart.)

If you have any comments on the recent EUR/USD action, please reply using the form below.

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