Dovish Powell & pushy Trump halt the dollar’s rebound

The dollar has given back most of its gains from earlier in the week after Fed Chair Powell’s Jackson Hole speech cemented expectations for a rate cut at the September FOMC meeting. That leaves the greenback on the backfoot heading into autumn. Even so, we remain of the view that, given the extent of Fed cuts already discounted in money markets (a bit more than our base case of 50bp of cuts this year and another 50bp in 2026), the dollar is more likely to stabilise over the coming months than fall sharply. That said, the risks are increasingly tilted towards the downside, with the Trump administration’s renewed efforts to exert control over the Fed a potential flash point.