EUR/USD likely to be buoyed as Fed's Powell puts focus on payrolls
Aug 23 (Reuters) -EUR/USD turned higher Friday and hit a fresh 13-month high as Fed Chair Jerome Powell struck a dovish tone at his Jackson Hole speech, while his remarks on the labor market have now placed major significance on the August payrolls report.
Powell said the time has come for policy to adjust and that his confidence has grown that inflation is on a sustainable path to 2%.
Investors were prepared for the Fed to begin cutting but the labor market comments may have had a bigger impact.
The Fed Chair said the central bank doesn't seek further cooling in the labor market and that labor market cooling is "unmistakable".
U.S. yields US2YT=TWEBUS10YT=TWEB hit fresh lows for the session while SOFR futures SRAH25 rallied.
German-U.S. 2-year spreads US2DE2=RR tightened, which helped rally EUR/USD.
Powell's comment led investors to set their sights on the August payroll report in two weeks.
A downbeat report similar to July's payroll data may sink yields and the dollar as investors will lean towards the Fed making a 50bps cut in September and being aggressive with easing thereafter.
EUR/USD dips may be bought for now and would reinforce bullish technical signals.
Daily and monthly RSIs imply upward momentum, EUR/USD is holding above many DMAs and a monthly bull hammer is in place for August.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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