The dollar remains on the backfoot as calm has been restored quickly in financial markets, with this week’s key economic data providing renewed support for the “soft landing” scenario. Next week is lighter on the data front but features the minutes from the July FOMC meeting as well as the Kansas City Fed’s annual Jackson Hole conference; Chair Powell’s keynote speech provides an early test of how policymakers see the recent US data and accompanying drop in US interest rate expectations. Our sense is that while he may take a dim view of recent speculation of a 50bp rate cut in September, the overall message is likely to reassure market participants looking for confirmation that policy rate cuts are now imminent. As such, the greenback may well remain under pressure in the near term, although given the extent to which Fed easing is already discounted, we doubt there is that much further dollar weakness in store.
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