FTSE 100 goes into red ahead of US Federal Reserve conference

Mario Draghi Euro-pound parity is set to cause problems for the ECB president

Mario Draghi Euro-pound parity is set to cause problems for the ECB presidentALAMY

The central banking conference in Jackson Hole, Wyoming, starts Thursday, with Federal Reserve Chair Janet Yellen scheduled to speak on Friday.

No central bank is finding it easy to withdraw policies that helped to keep Western economies afloat after the global financial crisis.

Those glacial price gains come even as unemployment has dropped steadily, more than halving in the U.S.to 4.3% since its post-recession peak and declining to 9.1% from a high of 12.1% in Europe.

Minutes of the July Federal Open Market Committee meeting released this week flagged a division among policymakers focussed on weak inflation as a reason to stall further rate increases and those who feel still loose financial conditions pose a risk the Fed needs to counter.

Trading activity may remain somewhat subdued, however, with another quiet day on the US economic front keeping some traders on the sidelines.

Mr Draghi's comments will still be scoured for any sign that the central bank boss may be willing to start unwinding the ECB's asset purchasing programme.

After recovering from an early move to the downside, stocks showed a lack of direction over the course of the trading session on Monday.

European stocks broke a three-day losing streak yesterday, building on gains in other markets and boosted by rising commodity prices. Still, the index is up 13.5 percent since the election.

The dollar index, which tracks the United States currency against a basket of six major currencies, was up 0.3 percent to 93.218.

This showed that emerging currencies tended to fall an average 0.6 percent in months when the dollar strengthened, whereas they rose by 0.4 percent against the basket during times of euro strength.

"This sustained pressure on the dollar comes just as geopolitical concerns have risen recently due in large part to the overhanging threat of North Korea's nuclear capabilities and the ongoing troubles.plaguing U.S. President Trump and his administration", said James Chen, head of research at Forex.com in Bedminster, New Jersey. The Euro was up by 11% against the Us dollar as of last week. The downtrend this year remains firmly in place, with August's trading pattern resembling more of a consolidation phase than a significant rebound.

Against the dollar, the pound was at its weakest point in almost four weeks, down 0.5% at 1.283.

There was further caution ahead of the Jackson Hole Symposium with tensions also increasing ahead of Wednesday's speech from ECB President Draghi and EUR/USD held above 1.1750.

ANALYST TAKE: "The general feel is that recent events (softer inflation and softer sentiment in markets) will ensure that both the Fed and the ECB will tread carefully", said Jim Reid, a strategist at Deutsche Bank.

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