Jackson Hole: Yellen and Draghi in focus - UOB

Peter Chia, FX Strategist at UOB suggests that in the ongoing annual conference of central bankers in Jackson Hole, Wyoming, focus will be on speeches from Fed Chair Yellen and ECB President Draghi.  

Key Quotes

“At this meeting, pressure is mounting on global central bankers to shed light on their plans to unwind the massive monetary stimulus put in place since the Global Financial Crisis almost a decade ago. In fact, the Fed, ECB, BOJ, BOE and the Swiss and Swedish central banks now hold more than $15tn of assets (compiled by FT last week), more than four times the pre-crisis level, following their respective stimulus programs. However, normalization is never easy given the sheer amount, the fragility of economies and a subpar inflation.” 

“Closely watched would be on Fed Chair Yellen and ECB President Draghi who are scheduled to speak on Friday. Yellen may say that the Fed is going from “relatively soon” to “soon” on its balance sheet reduction (BSR) plans. That would set up an announcement at the September’s FOMC followed by an implementation in October (our base case). Draghi would probably have a tougher task of communicating ECB’s plan to taper asset purchases eventually without triggering a surge in the euro-area currency and bond yields. In all, we forecast a steady appreciation to 1.20 by end 2Q18 for EUR/USD.”