Dollar Vulnerable to Dovish Repricing as Fed Rate Expectations Shift

The US Dollar is experiencing mixed trading near its one-week high as major currency pairs test key technical levels. According to Elias Haddad of Brown Brothers Harriman (BBH), EUR/USD is approaching its 200-day moving average, while USD/JPY is nearing the 160.00 level.

Haddad notes that despite divergent commentary from the Federal Reserve during Jackson Hole, the market aligns with Susan Collins' view that policy is mildly restrictive. This leaves the Dollar vulnerable to a dovish repricing of Fed rate expectations.

Fed funds futures currently price in 35% odds of a 25bps hike to 3.75-4.00% at the next September 16 meeting and nearly 50bps of tightening over the next twelve months.