Jackson Hole = USD Weakness – Draghi’s long awaited Jackson Hole speech was an attack on protectionism and a defense of free trade, but didn’t touch on current monetary policy and in the Q&A Draghi stuck to the script and repeated that inflation isn’t quite there yet while stressing that QE has worked. The dollar pulled back following Yellen’s prepared comments, which revealed no new clues on the policy outlook. As a result, the FX market appears to have gone back to its baseline expectations of no more rate hikes this year. Following the release of Draghi’s Jackson Hole speech, EURUSD rallied sharply. Draghi largely steered clear of policy intentions per se, instead calling for free trade, and the need to avoid risks from loose monetary policy. EURUSD popped to 1.1941, a better than 2.5 year high, from near 1.1875.
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