Once again, the investing community’s focus shifts to the Jackson Hole meeting to take place this week. Unlike in the past, the meeting takes place in the virtual space, due to the COVID-19 crisis.
However, it remains one of the most relevant monetary policy events in the year, as central bankers from all over the world meet to discuss the world’s economic and monetary policy developments.
What is the Jackson Hole Symposium and Why Should Traders Care?
No trader should discount the significance of the Jackson Hole Symposium. Truth be told, the market did not always react to news coming out of the small Wyoming city. But the discussions taking place there are crucial for the year ahead. Moreover, it is, perhaps, even more important now as the world’s economies are in recession due to the COVID-19 outbreak.
Make no mistake, this is no event to miss. Organized by the Federal Reserve Bank of Kansas City, the Symposium is the place where central bankers around the world meet over the summer to share ideas and opinions. Just like Norman Montagu and Benjamin Strong did back in the time (i.e., the Bank of England and Federal Reserve Bank of New York governors in the 1920s), central bankers still have the habit of getting together to discuss monetary policy developments.
This is one of the longest-standing central banking conferences in the world. In fact, it served as a model for the European Central Bank (ECB) for the introduction of the Sintra, Portugal, reunion.
This week the event is particularly important because the USD is on a slide lower across the FX dashboard. Ever since the Fed leveled the playing field and dropped the federal funds rate close to zero, the USD’s slide began. Moreover, the quantitative easing program in the United States and the subsequent fiscal stimulus sent the M2 money supply to the sky.
Only on Thursday, we will have the first reactions from the Jackson Hole Symposium. Fed’s Powell speech, called “Monetary Policy Framework Review,” will be closely watched to see if the Fed leans to average inflation targeting (AIT), yield curve control (YCC) or a combination of both.
As we saw last week, the Fed’s Minutes sent the USD higher as the Fed signaled no plans for YCC measures anytime soon. But if this was only a trial balloon to see how the market reacts, traders may be in for some interesting surprises.