Dollar stable below 2.97 shekels ahead of Jackson Hole symposium

There is slight movement in the dollar in the local market and calm in the global market ahead of the opening of the central bankers' symposium in Jackson Hole later today, alongside the speech by Fed Chair Kevin Warsh scheduled for tomorrow.

The dollar is trading below 2.97 shekels, while the euro is down by more than 0.5% and is trading above 3.45 shekels. In global markets, the dollar index remains unchanged at 99.1 points; the euro is steady, trading above 1.16 dollars; and the pound is trading around 1.36 dollars.

Kevin Warsh arrives in Jackson Hole with a communication challenge that has become a central issue in his first months as Fed Chair. His upcoming speech follows a complex press conference in July that left investors with questions regarding the Fed's decision to keep interest rates unchanged, the extent of policymakers' inflation concerns, and the likelihood of further rate hikes.

Warsh has made it clear that he intends to change how the bank communicates with markets. He prefers to reduce the use of explicit forward guidance, as he is uncomfortable with the expectation that policymakers must prepare markets in advance for every future decision. While not universally supported, many market participants accept this shift with understanding, acknowledging that central banks cannot accurately predict inflation, employment, or growth months in advance.

However, reducing forward guidance is not the same as reducing explanations of the bank's goals and considerations. Tomorrow's speech offers Warsh an opportunity to reassure investors.

In a recent review, Bank of America currency strategists noted that the US dollar is "on the edge" ahead of the Jackson Hole symposium and is "exposed to a continued wave of selling if Warsh disappoints the markets." The strategists defined Jackson Hole as a key risk event for both the bond market and the dollar. They suggest that after the Treasury's intervention, the Federal Reserve could help curb the rise in long-term US government bond yields by adopting a more hawkish stance or providing clearer guidance on inflation.

"We expect Chair Warsh to change his communication style to help curb pressures in the bond market. If he does not do so, we fear a possible rapid rise in yields at the long end of the curve to a level of more than 5.5%," they wrote. They added that if he focuses solely on broader structural issues like productivity or demographics, markets might interpret the message as dovish.