Original title: Powell attended the city hall meeting tonight to rehearse for debt reduction.

The options market shows that investors do not expect much movement in the market until next week's Jackson Hole meeting. However, they were caught off guard by the news that Federal Reserve Chairman Colin Powell would host a town hall meeting later on Tuesday.

Measures of the average one-week implied volatility of the euro, yen, sterling and Canadian dollar against the dollar are at their lowest level since February 2020, suggesting a degree of over-optimism in the market. That's because traders had been betting that Powell wouldn't talk about anything substantive until next week's meeting. Now, news has come from the market that Powell will answer questions from educators at the video forum on Tuesday.

Kengo Suzuki, chief foreign exchange strategist at Mizuho Securities, said that given that the meeting was aimed at educators and that the Jackson Hole meeting next week had attracted most attention, the market may have underestimated the importance of tonight's meeting. He said:

"Powell is likely to take this opportunity to prepare the market for what is about to happen at Jackson Hole."

The Jackson Hole Conference, which will be held from August 26 to 28, has been an occasion for important news releases in the past. At present, investors are looking forward to the annual meeting of central banks around the world and looking for the latest news on Fed policy. They want to know whether the strong July employment report will bring forward debt reduction.

However, there is no guarantee that Powell will make any comments on monetary policy at the town hall meeting, and he may also claim that the labour market needs to be further improved before reducing the size of bond purchases. After all, although the unemployment rate fell to 5.4 per cent in July, it is still well above the pre-epidemic level of 3.5 per cent in February last year.

If Powell really takes him by surprise and makes dovish remarks, the dollar may come under pressure, Treasury yields will continue to fall, and gold prices may gain short-term support.