Bank of America (BofA) notes that the FX market has been quite choppy and range-bound lately. The U.S. dollar has been strengthening mainly due to the U.S.'s relative growth outperformance and the rise in both nominal and real yields. However, this has happened in the context of a broader disinflationary trend in the U.S. and the expectation that other central banks may keep rates higher for longer than the Fed to control inflation.

Here's how they see potential outcomes based on what may transpire at Jackson Hole:

1. Higher-than-Expected Neutral Policy Rate:
   • If there is any hint or suggestion that the neutral policy rate could be higher than what is currently expected, this could serve as a catalyst for another round of dollar appreciation. In essence, it would indicate that the Fed might be willing to let rates go higher before declaring its monetary tightening cycle complete.
2. Eventual Rate Cuts Receive Prominence:
   • On the other hand, if there is significant discussion or emphasis on the potential for eventual rate cuts by the Fed, this could cause the dollar to decline and move back into the lower half of its trading range for the year.

Conclusion: BofA doesn't expect any strong policy signals to emerge from this year's Jackson Hole conference. However, they do suggest that the tone of discussions, especially regarding the neutral policy rate or the possibility of rate cuts, could influence the direction of the U.S. dollar.