Dollar Stability at Risk Amid Overstated Fed Expectations
Market strategists at ING believe that the US Dollar's stability is suppressed by post-CPI summer conditions, which are keeping foreign exchange volatility subdued. Francesco Pesole and his team think that this might continue for a couple of weeks.
The dollar's value has been relatively stable due to these conditions, but ING still sees scope for it to weaken further as market expectations for Federal Reserve tightening appear overstated. The upcoming Fedspeak and the Jackson Hole Symposium in late August could provide catalysts for market moves.
There is uncertainty surrounding the message that will emerge from the Jackson Hole Symposium after a recent CPI report leaned dovish but did not deliver a definitive signal. This could impact market expectations for further Federal Reserve tightening, which ING believes are too strong.