Canadian dollar slides as investors brace for Fed’s Powell

US President Trump takes aim at Federal Reserve for rates hike

Powell's Jackson Hole speech Friday morning presents the ideal opportunity for a measured but decisive pushback from the Fed chairman.

"Investors should be attentive to Jackson Hole", said Redeker.

United States and Chinese officials will meet in Washington Thursday following an invitation from the White House to discuss differences over worldwide trade that have seen the world's two largest economies come to blows in recent months.

The White House has imposed tariffs on around $250 bn of China's exports to the US, while China has retaliated with its own levies on a smaller amount of US goods, which has prompted fears of an all out "trade war" and helped drive the US Dollar higher ever since April. After falling in the front of week, the greenback regained momentum on Thursday to trade higher against all of the major currencies.

Year-on-year earnings growth in the U.S.is expected to be around 24 percent this year while Europe is forecast to deliver around 9 percent. With benchmark Treasury yields holding below 3 percent, investors now look to comments from Fed chairman Jerome Powell later this week when he speaks at a meeting of central bankers in Jackson Hole, Wyoming.

However, some market observers see dollar upside from here as limited.

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Predictably, the Federal Reserve could have a significant impact on the dollar.

Markets barely budged after the release of minutes from the Federal Reserve's policy meeting that ended August 1.Futures traders priced in a slightly higher chance that the Fed will increase rates two more times this year. The ECB's weekly schedule does not show a speech at Jackson Hole for ECB President Draghi but we'll know for sure when the Fed releases their detailed schedule at 8pm NY time today.

"They are just trying to gauge if there has been any shift in sentiment at the Fed, and it certainly doesn't seem that way at the moment", said Gennadiy Goldberg, an interest rate strategist at TD Securities in NY.

The offshore yuan slid 0.3 per cent to 6.8695 yuan per dollar after the latest round of tariffs took effect.

Neither the Standard & Poor's 500 Index nor the ten-year Treasury yield moved much in the aftermath of speeches by Fed Chairs Ben Bernanke and Janet Yellen, they found. "Any hint that his stance is softening (second-guessing the current QT schedule?) could trigger significant volatility in FX, likely providing a massive sentiment boost for global markets and a steep Dollars sell-off", says John Hardy, chief currency strategist at Saxo Bank.

President Donald Trump, in an extension of his attacks on many key USA institutions and norms, has vocally criticized Powell, his own pick to replace ex-Fed Chair Janet Yellen, for raising interest rates. The particular danger for him is that weakness could coincide with the 2020 election campaign, when he would be most vulnerable. -China trade talks set to resume under the cloud of Trump's prediction that they would make no real progress.

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