US Dollar: Warsh speech supports greenback – DBS
DBS Group Research economist Philip Wee notes that the US Dollar (USD) recovered after Fed Chairman Kevin Warsh’s Jackson Hole speech, as futures pricing restored a meaningful probability of a September FOMC rate hike.
The US Dollar (USD) regained strength following Federal Reserve Chairman Kevin Warsh's Jackson Hole speech, which sparked optimism among investors about a potential September Federal Open Market Committee (FOMC) rate hike. Warsh reiterated his focus on inflation but did not provide any specific guidance, leaving structural risks to the greenback unresolved in the longer term.
Despite markets acknowledging a 58% probability of a rate hike at the September 15-16 FOMC meeting, Warsh's conditional comments about the Fed needing to take action if inflation does not decline rapidly enough have left markets uncertain. The USD is benefiting from hawkish Fed signals and a "Bessent Put," but the greenback's longer-term risks remain.
The timing of a potential increase in the maximum size of Treasury buyback operations, coupled with the release of payrolls data on September 4, could create an opportunity to assess the impact of the policies on the market.
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