US Dollar Stable Below 2.97 Shekels Ahead of Jackson Hole Fed Chair Speech

The US dollar showed slight movement in the Israeli market, trading below 2.97 shekels, while the euro declined over 0.5% to above 3.45 shekels ahead of the Jackson Hole central bankers' conference. Globally, the dollar index remained steady at 99.1 points, with the euro and pound also unchanged, trading around $1.16 and $1.36 respectively. The focus is on Federal Reserve Chair Jerome Powell's upcoming speech, following a challenging July press conference that left investors uncertain about the Fed's interest rate outlook and inflation concerns.

Powell has indicated a desire to change how the Fed communicates with markets, moving away from explicit forward guidance to avoid creating false certainty about future policy moves. While this approach has mixed reactions, many market participants understand that central banks cannot predict inflation, employment, or growth with certainty months ahead. Powell's speech is seen as an opportunity to clarify the Fed's stance and reassure investors.

Bank of America currency strategists warned that the US dollar is vulnerable to further selling if Powell disappoints market expectations at Jackson Hole. Investment bank strategists described the event as a "key risk" for both bond and dollar markets. They noted that following recent Treasury interventions in the bond market, the Fed could help curb rising long-term US government bond yields by adopting a more hawkish monetary policy or providing clearer guidance on inflation forecasts and policy responses.

Strategists expect Powell to adjust his communication style to ease bond market pressures; failure to do so could lead to a rapid rise in long-term yields above 5.5%. They also cautioned that if Powell focuses solely on broader structural issues like productivity or demographics, markets might interpret the message as dovish, potentially weakening the dollar further.