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Fed Symposium Preview: Jackson Hole to Fuel Market Volatility

Fed Symposium Preview: Jackson Hole to Fuel Market Volatility

Rich Dvorak, Analyst

US DOLLAR, DOW JONES, GOLD PRICE VOLATILITY ELEVATED AROUND FEDERAL RESERVE JACKSON HOLE SYMPOSIUM DATES

The Fed is scheduled to kick off its annual economic policy symposium at Jackson Hole this week. Federal Reserve officials host well-known central bankers and finance ministers from around the world every year to discuss burning issues facing global economies. It has been announced that “Navigating the Decade Ahead: Implications for Monetary Policy” is the topic for this year’s Jackson Hole Symposium, which the Fed will livestream this Thursday and Friday, August 27-28.

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This high-impact event scheduled on the DailyFX Economic Calendar has potential to spark some serious volatility across the broader market – particularly when viewed against a backdrop of unprecedented monetary policy intervention over recent months to stave off economic turmoil caused by the ongoing coronavirus pandemic. Not to mention, the annual Fed symposium at Jackson Hole has historically catalyzed above-average readings of volatility for the US Dollar, Dow Jones, and gold.

US DOLLAR PRICE VOLATILITY ON JACKSON HOLE SYMPOSIUM DATES (CHART 1)

US Dollar Index Price Chart Volatility Federal Reserve Jackson Hole Symposium

US Dollar currency volatility observed is typically heightened around Jackson Hole Symposiums. This is indicated by intraday USD price action during the symposium compared to its respective 5-day average true range. The broader US Dollar Index could thus be at risk of making outsized moves in the days ahead. That said, the US Dollar could get a jolt if the Fed mentions changes to its view on interest rates, inflation, the pace of asset purchases going forward, or even yield curve targets.

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Gloomy discussions of the lingering adverse impact the coronavirus pandemic has had on underlying economic conditions could prompt an influx of risk aversion and perhaps fuel demand for safe-haven currencies like the US Dollar. Conversely, underscoring the need to keep financial conditions accommodative and a ‘willingness to do more’ could weigh negatively on the Greenback. Download our comprehensive US Dollar forecast for additional insight found in our free trading guide below.

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DOW JONES PRICE VOLATILITY ON JACKSON HOLE SYMPOSIUM DATES (CHART 2)

DJIA Price Chart Dow Jones Volatility Fed Symposium Jackson Hole

Volatility readings clocked by major stock market indices like the Dow Jones have been similarly elevated around the annual Fed Symposium. Though this is not always the case, which may be due to the seasonal summer lull and corresponding volatility compression, stocks could still swing wildly in response to remarks out of Jackson Hole.

Wall Street MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 0% 3% 1%
Weekly 38% -31% -15%
What does it mean for price action?
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Doubts over sustaining the economic recovery since global GDP growth collapsed earlier this year stands out as one hot topic with potential of fueling equity volatility. Nevertheless, if global central bankers stand committed to providing an abundance of liquidity and maintaining benchmark interest rates at historic lows, the Dow Jones might continue marching higher with valuation multiples and other risk-assets.

GOLD PRICE VOLATILITY ON JACKSON HOLE SYMPOSIUM DATES (CHART 3)

Gold Price Chart Volatility Real Yields Fed Jackson Hole

Gold price action generally intensifies around the Jackson Hole Symposium as well. This comes as little surprise seeing that interest rates and inflation are two primary drivers of the precious metal’s direction and are also two themes often covered in great detail by the Fed at Jackson Hole. On that note, gold prices look like they are sitting on the edge of a knife as the anti-fiat asset teeters around a critical technical support level after falling 7% from its all-time high printed earlier this month.

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The upcoming Jackson Hole Symposium could serve as a platform that provides gold price action with a strong enough fundamental push that fuels a larger breakdown or recommencement of the broader bullish trend. Prematurely hinting at monetary policy exit strategies for down the road might roil gold bugs and motivate capitulation to recent selling pressure, whereas suggesting the need to double down on recent accommodative efforts might keep precious metals bolstered.

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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