US Dollar: Looking for a shift in Fedspeak – ING

ING strategists Francesco Pesole, Frantisek Taborsky, and Chris Turner observe that post-CPI summer conditions are suppressing foreign exchange volatility and maintaining the Dollar's stability. However, they believe there is potential for the Dollar to weaken due to overstated expectations of further Federal Reserve tightening.

Upcoming Fedspeak, Jackson Hole, and second-tier U.S. data are seen as possible catalysts for market moves. For now, a preference for a weaker Dollar persists as market conviction around further Federal Reserve tightening is considered too strong. Fedspeak offers the clearest potential catalyst for market moves, but there is considerable uncertainty over the message that could emerge from the late-August Jackson Hole Symposium, especially after a dovish CPI report without a definitive signal.

U.S. economic data for the month includes July retail sales, expected to be modest at 0.1% month-on-month, and the University of Michigan surveys, which are anticipated to show little change from July. These secondary releases would likely need to provide significant surprises to trigger a meaningful Dollar reaction. Middle East developments remain a marginal factor, affecting relative-value trades more than direct Dollar crosses.