Warsh Speech Risks Asymmetric USD Reaction, Commerzbank Warns

The US dollar stabilized after last week's setback and has since appreciated slightly against the euro and other currencies. However, Kevin Warsh's upcoming speech in Jackson Hole poses a potential risk to the USD's stability.

According to Commerzbank's Volkmar Baur, two key points will be focused on during Warsh's speech: his guidance on a possible interest rate hike in September and any hints about changing the Fed's inflation measure. If Warsh suggests that the Fed might adopt a different measure of inflation, such as the Dallas Fed's Trimmed Mean Inflation, it could be seen as dovish for the USD.

This would likely put pressure on the US dollar, making it come under pressure. On the other hand, if Warsh hints at an interest rate hike in September, it would provide significant support for the USD.