Dollar Bulls Face Debasement Fears After Warsh Speech Fallout

The US dollar has surrendered around half of its post-Jackson Hole gains following Federal Reserve Chair Kevin Warsh's hawkish speech last Friday. Despite this, ING's Francesco Pesole notes that front-end US rates remain firmly supported.

The 2-year SOFR rate has held above 4.20%, more than 10bp higher than before the speech. Pesole argues that concerns over long-end yields and potential Treasury intervention are feeding a debasement narrative.

ING's baseline sees solid US data this week, reinforcing expectations for a September Federal Reserve hike and allowing DXY to reclaim the 100.0 level. Markets would need a string of materially disappointing data releases to reassess September FOMC expectations.