Dollar Volatility Set to Rise as Fed Expectations Look Overstated

US Dollar volatility remains subdued due to post-CPI summer conditions, according to ING strategists. The strategists note that market expectations for further Federal Reserve tightening look overstated and see scope for a weaker Dollar.

Fedspeak is seen as the clearest potential catalyst for market moves, with considerable uncertainty over the message that could emerge from the late-August Jackson Hole Symposium. The recent CPI report leaned dovish but did not deliver a definitive signal.

The US calendar includes July retail sales and University of Michigan surveys, which are expected to show little change from July. These releases would likely need to deliver significant surprises to trigger a meaningful dollar reaction.