Assets before and after Powell's Jackson Hole Speech August 23rd 2024

A month before August 24th, 2024

I am monitoring selected investment assets performance, including some fiat currencies prices, from February 2022. The reading is done monthly on 24th day of each month. It allows to monitor the potential influence of military conflict in Europe which began on February 24th, 2022. War in Ukraine, however, has been continuing for thirty months already and is no longer the major factor which shapes investors’ minds and sentiments. On the contrary, my observation showed several times that one of the most important forces for all observed assets is the monetary policy of American Federal Reserve. Probably the only significant exception to this rule is the market of crypto assets (in my basket cryptocurrencies are represented by Bitcoin). Last month investors were again looking for Federal Reserve to confirm that rate cut in September is already decided. They were quite convinced the cut was inevitable. Consequently, US Dollar was weakening and such assets like Euro and gold were strengthening. Polish Z?oty grew as well. On the contrary, Israeli currency – the Shekel – was gradually deteriorating. In this case the local uncertainties related to another phase of Israel-Iran mutual tensions did not help Shekel to benefit from the global trend of weakening dollar. Altogether, from July 24th to August 23rd Z?oty gained over 3.5%, Euro close to 3.0%, and gold ounce ca. 4.0%. At the same time Israeli Shekel fell by more than one percent. Bitcoin, as usual, was living in its own, diverging world. Firstly, its price felt and reached the bottom of fifty thousand dollars per coin. It was on August 5th, 2024. Then it started to climb up back to make up for some loss of value. Nevertheless, Bitcoin lost more than 7% during the last 30 days. Gold made another historical record, temporarily breaking 2.5 thousand dollar ceiling on August 20th. All above calculations are based on the August 23rd prices, preceding FED Chair’s speech. After the speech every asset moved rapidly and the picture changed again. ??

Bitcoin in last 30 days, before August 24th 2024. The chart shows the minimum on August 5th, 2024 followed by steady upward trend; data source: xe.com

Powell’s speech and its impact to US Dollar.

“The time has come for policy to adjust.” This short sentence make its way to the speech of Federal Reserve’s Chair J. H. Powell; and when it was expressed the markets dynamically reacted. Afterwards, the speech was dubbed as “strongest signal yet on rate cuts” by The Wall Street Journal. For US Dollar the speech, revolving around passed epidemic of COVID-19 and the history of American economy since, was a trigger to further weakening. The Wall Street Journal US Dollar Index sharply fell under 96.0 which is the lowest level this year. Clearly, the speech confirm the tendency for weak greenback. It helped Bitcoin to gain more than two percentage points and reduce the effect of recent fall, which shows, by the way, that the cryptocurrency is not absolutely immune to the influence of FED. Any other asset in the basket rose in response to the Jackson Hole speech, too. It included Israeli Shekel, the asset which has been continuously losing its value for several months.

WSJ US Dollar Index on the day of Powell’s speech in Jackson Hole. Source: www.wsj.com

Asset performance from July 24th to August 24th, 2024

Since last checkpoint in July the assets in the basket performed generally well. Currencies (excluding Shekel) and gold has grown recently. The last expectations toward FED rate cuts, confirmed in Jackson Hole, made the growth even more significant. As the result Euro is now only 0.9% below its February 2022 (pre-war) level and costs 3.5 US cent more today than a month ago. Polish Z?oty is worth 6.5% more now than before the war in Ukraine broke out (it means we must pay almost 2.5 US cent more for one Z?oty than 30 months ago). Bitcoin is now traded on $64,100 level (+71.8% comparing to pre-war pricing), still being cheaper than a month ago (ca. $1,800). Shekel is also down, and the currency deterioration looks unstoppable, even with the strong verbal stimulus of Federal Reserve Chair. Gold is priced over 2.5 thousand dollars per ounce, close to the all-time high. It means the asset has grown by over 30% during last thirty months. Spectacular result indeed. The chart below shows overall performance of the assets during thirty months after the war in Ukraine began.?

Gold, Euro, Bitcoin, Shekel and Z?oty price for last 30 months. The chart showing relative change of the average market price in USD; data source: xe.com

More read:

More on WSJ USD Index on wikipedia

The transcript of the speech on Federal Reserve webpages

Immediate market reactions to the speech; report delivered by WSJ

Other?posts of the series are available on digitalbankology.com blog