Non-comments out of Jackson Hole Central Bankers’ Conference Push…

In this weekend update, we discuss the non-comments out of Jackson Hole Central Bankers’ Conference.

During the days leading up to the Jackson Hole Central Bankers’ Conference the EUR/USD pair traded in a 100 pip range and it appeared investors were waiting for some guidance from the central bankers indicating new potential monetary policy. Instead of providing any guidance, the ECB’s Mario Draghi and the FOMC’s Janet Yellen gave no indication of monetary policy change.

Some investors though that Mario Draghi would talk down the strength of the euro after the euro has reached 32 month high. Draghi’s comments did not reference the euro’s strength at all. The lack of comments or lack of desire to weaken the euro strengthened the euro.

Similarly, some had hoped that Janet Yellen would provide a sense of timing for reduction of the balance sheet. Yellen gave no indications of change in the balance sheet nor in interest rate changes. The lack of comments from Yellen weakened the dollar.

Where both central bankers provided no new direction, the reaction to both was opposite for each currency. The EUR/USD has gained over 1500 pips YTD offsetting all the U.S. dollar gains in the previous 2 years. Based on no new monetary policy, it would still appear the pervious trend continues but we feel the move is over-extended and we will watch for a test of 1.20 or 1.22 and weekly price reversal after testing the previous highs.