US Dollar: Warsh speech keeps rate hike debate open – Commerzbank

Commerzbank's Thu Lan Nguyen highlights that Kevin Warsh's Jackson Hole speech has boosted the US Dollar, signalling potential tighter monetary policy and a possible September rate hike. However, she cautions that upcoming US labour market data, inflation figures, and developments in the Iran war could still alter expectations. A rate hike in September is now seen as more likely, but it is not a certainty, so caution is advised when jumping on USD euphoria.

The upcoming US labour market report and new inflation figures are the key items on the agenda. Recent labour market data has been mixed, with a disappointing July employment report and expectations of a stronger outcome in August. If consumer prices continue to rise moderately, it could provide FOMC members with a reason to remain patient before taking action.

The Fed has refrained from raising interest rates despite high inflation, with only three out of twelve FOMC members voting in favour of tightening policy. The situation has not changed dramatically since Warsh's speech, as data releases and the Iran war developments could still alter expectations.