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The Jackson Hole Economic Symposium is an annual forum for central bankers, finance ministers, and financial market participants from all around the world. It has been sponsored by the Federal Reserve Bank of Kansas since 1978 and got its name because it has been held in a ski resort in Jackson Hole, Wyoming since 1981.

But just because it takes place on a ski resort doesn’t mean it’s all fun and games. I’m pretty sure the snow forts and snow men come out AFTER the serious business is over. The symposium is a venue for hot shot finance nerds to get together and talk about important economic issues. Sometimes, major announcements and revelations are made during the event, so market players make it a point to follow it closely as it can lead to large moves across different financial markets.

This year, the symposium is drawing a lot of attention mainly because of what happened last year. If you recall, it was in Jackson Hole that Big Ben first hinted about QE2, though it wasn’t made official until November. Back then, the main reason for QE2 was to combat deflation. We only need to look so far as commodity prices to see that it was successful in that sense.

Bernanke also discussed the possibility of a double-dip recession, which was already a pressing threat last year. But even as early as then, he had already stated his commitment to see to the economy’s recovery.

Fast forward to this year’s Jackson Hole Symposium, the global economy is still very fragile and has been hit by even more problems. There are debt problems left and right while some economies even have to deal with austerity measures or natural calamities. Because of that, the economic gurus over at Morgan Stanley decided to downgrade their global growth forecasts and stress that the U.S. and Europe are both on the verge of another recession. Yikes!

Of course, central bankers are keen to prevent a double-dip from taking place. However, recent data has not been on their side. Just last week, the U.S. printed a dismal Philly Fed index , which plummeted from 3.2 to -30.7 for July. That’s its lowest reading since March 2009! Oh, and did I mention that this indicator has never dipped this low without a recession tagging along?

Right now, however, options are limited for policymakers. As I mentioned earlier, inflationary pressures are already strong, and flooding the economy with more easy money could push commodity prices even higher. That’s a scenario central bankers would want to avoid considering how growth and spending are still feeble.

So what can we expect from this week’s Jackson Hole Symposium? More importantly what can happen if Bernanke hints at QE3 this time?

Recall that the Fed head already remarked that the FOMC is closely monitoring the U.S. economy and is prepared to make any monetary policy adjustments if necessary. If he does make an announcement similar to last year’s, the U.S. dollar just might react in the same way. Here’s a chart of USDX showing the massive dollar selloff in the days that followed Bernanke’s Jackson Hole speech in 2010:

PoD Chart

But if the Fed head does the unexpected and attempts to assure market participants that a full-fledged economic recovery will take place sooner or later, this could take some selling pressure off the U.S. dollar. Either way, brace yourselves for some big moves in the next few days!