$Dollar Forecast: Pressure Remains Amid Fiscal Discipline Concerns

The US dollar has been under pressure in recent weeks due to concerns about the country's fiscal discipline. The 'debasement' trade, which saw currencies of countries with better fiscal discipline outperforming the greenback, will be put to the test this week with fresh policy updates from the US government.

The US Treasury Secretary has hinted at a fiscal consolidation plan, but few expect meaningful spending cuts or tax increases given the Trump administration's pro-growth policies. A more structural solution is needed to deliver a sustainable improvement in the bond market.

Kevin Warsh's speech on Friday at the Jackson Hole summit will be closely watched, particularly as he is under pressure to reinforce the Fed's inflation-fighting credentials. Unless yields start to head lower, the pressure will likely remain on the US dollar.