Euro Holds Modest Bids Above 1.1650 Ahead of Jackson Hole Symposium

EUR/USD traded modestly higher during the Asian session on Friday, hovering around 1.16535, extending its earlier tone of modest buying. Market sentiment turned cautious, with investors broadly awaiting Federal Reserve Chair Jerome Powell's keynote speech at the Jackson Hole global central bank symposium later in the day for clear clues on the timeline for tapering asset purchases.

**Jackson Hole Symposium Becomes Market Bellwether**

The annual Jackson Hole global central bank symposium is being held from August 26 to 28, shifted to a virtual format due to the pandemic. The symposium has historically been viewed as a bellwether for monetary policy, having signaled major policy moves such as quantitative easing and interest rate hikes. Powell is expected to deliver his online remarks on August 27, with markets closely watching whether he will reveal more about the roadmap for scaling back asset purchases. According to analysis from Pepperstone, even if Powell does not announce any major policy changes, it could set the stage for the formal rollout of future policy.

**Inflation Data and Policy Expectations Intertwine**

This Friday will also see the release of the U.S. core PCE price index for July, the Fed's preferred inflation gauge. Markets expect the data to rise 3.6% year-over-year, up from the prior reading of 3.5%. The surge in short-term inflation and a rebound in employment data have already led the Fed's July meeting minutes to signal the start of tapering before year-end. This further underscores the importance of the current Jackson Hole meeting, as any hint regarding the tapering timeline could trigger short-term directional moves in the EUR/USD exchange rate.

**Market Sentiment Turns Cautious**

Ahead of the key risk event, EUR/USD has largely maintained a narrow trading range. Although the pair is currently holding steady around 1.16535, market participants note that if Powell's speech delivers a clear hawkish signal, the dollar could gain support, thereby weighing on the euro; conversely, if the tone is dovish or offers no new policy guidance, the euro could extend its modest rebound momentum.