Forex Analysis

Symbol: GBP/JPY Action: SELL Entry Range: 195.052 - 194.992 Target 1: 194.738 Target 2: 194.482 Target 3: 194.175 Target 4: 193.902 Stop Loss: 195.326

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Jerome Powell’s Key Speech: What You Need to Know Federal Reserve Chair Jerome Powell recently delivered an important speech at the Jackson Hole retreat, touching on key economic issues and the Fed’s potential future moves. While much of the attention has been on inflation and interest rates, Powell’s address also covered some less-discussed but equally important topics. The Fed’s Changing Approach Powell hinted that the Federal Reserve might be shifting its approach soon. While he didn’t commit to specific actions, his comments suggest the Fed is considering a change in its monetary policy. Powell’s exact words were, “The time has come for policy to adjust.” This indicates that the Fed is moving away from its aggressive stance on inflation and starting to think about the broader economy. Reflecting on Past Decisions A significant portion of Powell’s speech was dedicated to reflecting on the past decisions made by the Fed, especially during the height of the inflation surge. Over the past couple of years, the Fed implemented 11 interest rate hikes to tackle inflation, which had reached alarming levels. Powell acknowledged the challenges faced during this period and the difficult decisions that had to be made. What stood out was Powell’s reflection on the Fed’s initial belief that inflation was “transitory,” meaning temporary. He admitted that this assumption, widely shared by economists, turned out to be incorrect. This misjudgment led to a delay in taking action, requiring the Fed to later ramp up its efforts to control rising prices. Acknowledging Global Factors Powell didn’t just focus on domestic issues. He emphasized that the inflationary pressures were part of a global trend, not just a U.S. problem. The pandemic caused disruptions worldwide, leading to strained supply chains, tight labor markets, and rising commodity prices across the globe. This global perspective was crucial in understanding the broader context of the Fed’s actions. Progress and Challenges Ahead While Powell noted the progress made in reducing inflation, he was clear that the journey isn’t over. Inflation has come down, but Powell stressed that the Fed’s work is ongoing. He made it clear that the central bank’s focus is not just on controlling prices but also on maintaining a strong labor market. Looking ahead, Powell did not provide a clear timeline for when the Fed might start cutting interest rates. However, he did mention that any future decisions will be heavily influenced by new economic data and the overall economic outlook. The Market’s Reaction As Powell delivered his speech, the financial markets reacted almost immediately. The stock market saw gains, and Treasury yields fell as traders began to anticipate a possible interest rate cut in the near future. Some market watchers believe that a rate cut could come as soon as September, though nothing is set in stone. Final Thoughts In his concluding remarks, Powell left the door open for different interpretations of the Fed’s actions. He acknowledged that while the Fed has made significant progress, there is still much to learn and understand about the current economic environment. Overall, Powell’s speech was a careful balancing act—acknowledging past mistakes, signaling possible future changes, and keeping options open as the Fed navigates the complex economic landscape ahead. SOURCE : CNBC (https://www.cnbc.com/2024/08/23/fed-c...) Risk Disclosure

Key Points from Jerome Powell’s Economic Address Federal Reserve Chair Jerome Powell recently delivered a speech at an economic symposium in Jackson Hole, Wyoming. He discussed the current economic conditions, the effectiveness of monetary policy, and the path forward. Below are the most significant points: 1. Economic Recovery Post-COVID: Powell emphasized that the severe economic disruptions caused by the COVID-19 pandemic are gradually diminishing. He pointed out that inflation has notably decreased, the job market has cooled down, and supply chain issues have largely been resolved. The Federal Reserve has made significant strides in achieving price stability while also supporting a robust labor market. 2. Present Economic Status: Powell highlighted that inflation, which had been a significant concern over the last three years, has shown signs of moderation, with prices rising by 2.5% over the past year. He expressed optimism that inflation is on a sustainable trajectory toward the Federal Reserve’s 2% target. 3. Labor Market Trends: The labor market has eased from its previously overheated state. The unemployment rate has risen to 4.3%, yet it remains relatively low by historical standards. This increase is largely due to an expanding labor force and a slowdown in hiring rather than a surge in layoffs. Powell stressed that the labor market is no longer a major driver of inflation. 4. Economic Growth: Despite the cooling in the labor market, the economy continues to grow steadily. Powell noted that the risks have shifted, with the potential for inflation being less of a concern and the risks to employment becoming more significant. He suggested that the Federal Reserve may adjust its policies in response to these changing conditions. 5. Monetary Policy Outlook: Powell suggested that it might be time for the Federal Reserve to make policy adjustments, with the direction being clear, but the timing and pace depending on future economic data. The Federal Reserve remains dedicated to supporting a strong labor market while continuing progress toward stable prices. 6. Understanding Inflation: Powell discussed the factors that led to the rise in inflation to its highest levels in decades and the reasons for its recent decline, despite low unemployment. He explained that the pandemic caused major disruptions in both supply and demand, contributing to inflation. However, the easing of these disruptions, along with the Federal Reserve’s restrictive monetary policy, has helped to reduce inflationary pressures. 7. Federal Reserve’s Response to Inflation: The Federal Reserve initially believed that inflation would be temporary, but as it became more persistent and widespread, the Fed took a more aggressive approach by raising interest rates significantly to control inflation. 8. Global Inflation Trends: Powell pointed out that high inflation was not just a U.S. issue but a global one, driven by similar factors across the world, such as supply chain challenges, tight labor markets, and rising commodity prices. 9. Labor Market’s Role in Reducing Inflation: The cooling of the labor market has been crucial in bringing down inflation without causing a sharp rise in unemployment. The job market has stabilized, with fewer job vacancies and slower wage growth, which has helped to keep inflation under control. 10. Future Considerations: Although progress has been made, Powell warned that it is too early to declare victory. The Federal Reserve remains alert and ready to adjust its policies as needed to ensure that inflation continues to decline and the labor market stays strong. For More Information Visit : https://www.fmanalysis.com Risk Disclosure

Fed Faces Potential Job Losses in Revised Data Recent updates suggest that U.S. job growth from the past year might have been much weaker than first reported. This could raise concerns that the Federal Reserve might be lagging behind in its plans to reduce interest rates. Key Points: (A) Economists at Goldman Sachs and Wells Fargo predict that government revisions could show job growth was 600,000 less than originally estimated, or about 50,000 fewer jobs per month. (B) JPMorgan Chase expects a smaller reduction of about 360,000 jobs, but Goldman Sachs warns it could be as high as 1 million. (C) If the downward revision exceeds 501,000 jobs, it would be the largest in 15 years, suggesting the labor market has been slowing down for a longer time than previously thought. Final numbers are expected early next year. Impact on the Federal Reserve: (A) This data could influence Fed Chair Jerome Powell’s upcoming speech in Jackson Hole, Wyoming, as investors are eager to understand when the Fed might start lowering interest rates. (B) According to Wells Fargo economists, a significant negative revision would indicate that job growth was already slowing before April, making the risks to the Fed’s goal of full employment more apparent. About the Revision Process: (A) The Bureau of Labor Statistics (BLS) annually updates March payroll data using a more accurate data source, the Quarterly Census of Employment and Wages (QCEW). This census hinted at weaker job growth last year. (B) Currently, BLS data shows 2.9 million jobs were added in the year through March 2024. Even if the revision reduces this by 1 million, job growth would still average 158,000 per month, which is slower but still healthy. (C) Some experts, like Omair Sharif of Inflation Insights, believe the final revision might be on the lower side because QCEW data often gets adjusted upwards due to reporting delays. Broader Economic Concerns: (A) The preliminary revision might spark debate about whether the labor market slowdown could lead to a sharper economic downturn. Hiring was significantly reduced in July, and unemployment has been rising for four consecutive months. (B) Although the job market is still considered strong, policymakers are likely to start lowering interest rates in September. (C) Powell and other Fed officials have been focusing more on labor market data, and Wednesday’s payroll revision will be key in shaping their outlook. Challenges with Data Models: (A) In recent years, monthly payroll figures have often been higher than QCEW data, partly due to adjustments for the birth and death of businesses. However, these adjustments might not be as accurate in the post-pandemic world. (B) Some, like Anna Wong from Bloomberg Economics, believe job gains have been overstated and expect that April and July 2024 payrolls might be revised close to zero, far below a rate consistent with neutral unemployment. (C) Ronnie Walker of Goldman Sachs suggests that the QCEW figures might overstate the slowdown in job growth, as they likely exclude unauthorized immigrants who have contributed significantly to job growth. Risk Disclosure