24.08.202113:39 Forex Analysis & Reviews: Jerome Powell suits both Republicans and Democrats

The US dollar remains under pressure in pair with the European currency before one of the most important meetings of the US central bank representatives this year. The speech of Federal Reserve Chairman Jerome Powell at Jackson Hole this year may be his last. However, Powell has long earned a reputation as an experienced defender of the US central bank thanks to strong personal ties with Congress, which should help him stay for a second term. According to experts, since February 2018, when Powell headed the Fed, he has held at least 350 meetings, lunches, or telephone conversations with members of Congress. The 68-year-old Powell has already been approved for re-nomination. However, his status has significantly increased after the recent statements of the current US Treasury Secretary Janet Yellen, who supported Powell, saying that the Fed is in safe hands. Powell restored the respect of both parties for the Fed in Washington and gained many personal allies. Even Republicans want his reappointment. Powell's courtship of lawmakers is not intended only for his fellow Republicans. Most recently, he impressed progressives with his frankness in recognizing the mistakes of the Fed, which could slow down job growth in the United States after the coronavirus pandemic. Experts note that Powell's strengthening relations with Republicans on Capitol Hill and the trust he enjoys on Wall Street would help him in the future to more aggressively seeking employment growth. Moreover, he worries less about long-term inflation than any Fed chairman in more than 50 years.

Democrats, who do not all appreciate Powell's efforts to achieve the independence of the Fed and accuse him of canceling some post-crisis banking rules, also admit that they personally like him. Almost everyone agrees that he conducted monetary policy well and helped financial markets survive the period of chaos at the beginning of the COVID-19 pandemic. Powell met even with skeptics, trying to prove the importance of his candidacy for this post allows him to count on a second term seriously. In a recent interview, many senior Democratic Party officials said that they would vote to confirm Powell for a second term. In addition to Powell, Biden also has the opportunity to change the deputy chairman for supervision of banking rules; this position is occupied by Randal Quarles, whose replacement may appease some liberal senators.

As for statistics, unconvincing data on the eurozone's private sector so far curbs the appetite for risks among investors, preventing the euro from demonstrating more active growth.

Yesterday's IHS Markit report showed that the composite eurozone PMI index fell to 59.5 points from a 15-year high of 60.2 points in the previous month. A value above 50 suggests further growth. It is worth noting that the growth of the service sector for the first time after the pandemic exceeded the growth of the manufacturing industry, which was facilitated by the further opening of the economy. The managers' index for the services sector was 59.7, while it was expected to remain unchanged at 59.8. The manufacturing PMI fell to 61.5 from 62.8 a month ago. Although the spread of a new type of Delta coronavirus strain caused widespread problems throughout the European region, limiting demand and causing further supply problems, many companies and firms benefited by easing restrictive measures, which made it possible to compensate for the decline in the indicator. IHS Markit noted that the link between the PMI and GDP had been broken since the beginning of the pandemic, and it is still encouraging that companies continue to report high production growth rates. Germany remained among the leaders of growth, where the index, although it slowed down from a record level for 23 years, the pace remained relatively high. The index fell to 60.6 from 62.4 in July. In France, the same indicator slowed to a four-month low: the composite index fell to a low of 55.9 in August from 56.6 in July.

The data from the European Commission also did not please traders, limiting the upward potential of risky assets in the second half of the day. The report indicates that the consumer confidence index fell to -5.3 points from -4.4 points in July, while economists had forecast an estimate of -5.0.

As for the technical picture of the EURUSD pair, a breakout of the resistance of 1.1750 is required to resume active growth. Only going beyond this range will open the opportunity for bulls to build up long positions to update the highs of 1.1775 and 1.1800. It will be possible to talk about the return of pressure on the trading instrument only after the breakthrough of the intermediate support of 1.1720, which will quickly push the EURUSD to the base of the 17th figure, and then to the minimum of 1.1666.

GBP

The British pound continues to recover at a record pace even despite the slowdown in the growth of the UK private sector. Problems related to staff shortages and supply chains continue to affect the growth rates of the indices. A report by IHS Markit and the Chartered Institute of Procurement & Supply said that the composite index fell to a six-month low of 55.3 in August from 59.2 in July, with economists' forecast of 58.4. The decline was observed in both the manufacturing and services sectors. The purchasing managers' index for the services sector fell to 55.5 from 59.6 in July, while the manufacturing PMI reached a five-month low of 60.1 against 60.4 in the previous month.

As for the technical picture of the GBPUSD pair, the bright surge of the pound slowed down in the resistance area of 1.3745, on which all the emphasis is placed today. Only going beyond this range will lead to a more significant upward correction in the highs of 1.3780 and 1.3840. The bulls have already managed to protect the important support at the base of the 37th figure today. Its breakdown will quickly push the trading instrument to the lows of 1.3660 and 1.3610.