GBP/USD breaks through to 1.32 ahead of Jackson Hole Summit

The pound came out on top on Wednesday as Downing Street rejected claims that Boris Johnson is planning to step down as PM in six months.

Sterling is clinging to these gains so far this morning, with GBP/EUR stable at €1.1172 and GBP/USD flat at $1.3225. GBP/CAD is rangebound at C$1.7374, while GBP/AUD and GBP/NZD hold steady at AU$1.8215 and NZ$1.9909, respectively.

Looking ahead, all eyes will be on a speech by Jerome Powell today. Could the Federal Reserve Chair’s comments on inflation drag the US dollar lower?

What’s been happening?

The pound roared higher through yesterday’s trading session as Downing Street dismissed rumours the PM might step down in 2021.

This follows a report in The Times which cited Johnson’s continuing struggle with his health after contracting the coronavirus earlier this year as being behind the decision.

The US dollar, meanwhile, trended higher on Wednesday, with investors favouring the currency in the wake of July’s US durable goods orders releases.

These revealed a surprisingly strong expansion in orders last month, with order growth jumping from an upwardly revised 7.7% to 11.2%, beating expectations that the spike in US coronavirus cases would have hampered activity in July.
The euro fell back through yesterday’s session amidst ongoing concerns over the economic impact of Europe’s coronavirus resurgence.

Adding to the pressure on the single currency were comments from the European Central Bank’s (ECB) Isabel Schnabel, as her speech on the ECB’s negative interest policy hinted that more easing could be needed in the face of elevated uncertainty.

What’s coming up?

Centre stage today will be the start of the Federal Reserve’s annual Jackson Hole Symposium of central bankers.

The event will be kicked off by a hotly anticipated speech by Fed Chair Jerome Powell, who is tipped to signal that the Fed will allow inflation to run hotter for longer, paving the way for additional stimulus in the future and potentially weighing on the US dollar.

In the UK, lingering Brexit concerns could limit movement in the pound in the second half of this week’s session, particularly in the run up to BoE Governor Andrew Bailey’s own Jackson Hole address on Friday.

The euro may also struggle to find any strong directional bias today as the absence of any notable EUR data releases leaves the focus on the Eurozone’s coronavirus situation.