Traders getting ready for the week of Dollar weakness

This week, the US and the world economies are going to face a most crucial event. On August 27, the Jackson Hole economic symposium is going to be held. Thus, central bankers, finance ministers, academics, and financial market participants from around the world will attend the event. Jerome Powell, the Fed chairman, will discuss critical economic issues and review the monetary policy. 

Investors and Policymakers are anxiously awaiting for the symposium’s arrival. The Federal Reserve has made it clear that it would take any measures to preserve the country’s economic stability. The central bank has kept aggressive stimulus measures since beginning the coronavirus outbreak. Recovery from the crisis seems highly uncertain.

There are concerns about the integrity of financial markets. Companies that were sinking have been supported by easy access to liquidity. Yet, if the Federal Reserve proposes less-aggressive easing, it could hurt assets arising in an accommodative environment. 

Concerns about disruption may lead to aggressive credit downgrades and liquidation. Furthermore, the problem with these instruments will be aligning sellers and buyers who may not be interested in exchanging at their corresponding price levels. This would result in volatility leaking into broader financial markets. The Federal Reserve would have to intervene again and stabilize an uncertain market that it created indirectly.

Even though the current economic situation is the most severe since the Great Depression, the stock market beat all-time highs. 

Analysts also think that the US dollar selling pressure may gain momentum if consumer-related data beat market expectations and supported the narrative about financial stabilization. 

The CitiGroup Economic Surprise Index outperformed economists’ expectations. It also supported the idea that analysts overestimated the difficulty of the economic recession. This could pressure demand for havens and imply another week of Greenback weakness.