Credit Agricole CIB Research discusses its expectations for the USD reaction around tomorrow's Fed Powell speech at Jackson Hole.
"The drift higher of US rates and UST yields continues ahead of Jackson Hole and together with still weak risk sentiment has boosted demand for the high-yielding, safe-haven USD of late. We continue to think that the recent price action is raising the bar for a hawkish surprise from the speech of Fed Chair Jerome Powell in particular. Indeed, the US rates market current pricing of policy tightening seems consistent with that signalled by the June Fed dot plot," CACIB notes.
"With many positives related to the Fed already in the price of the USD, we continue to think that the currency’s main support could be a potential further deterioration of risk sentiment. Indeed, should a hawkish message from Powell undermine global risk sentiment, the USD could be the main beneficiary," CACIB adds.