Reassessing the dollar outlook ahead of Jackson Hole

The dollar remains on the backfoot as expectations for a rate cut at the September FOMC meeting continue to solidify. We now expect policymakers will opt for a 25bp cut next month, and a cumulative 75bp of policy easing by the end of next year (compared to 50bp in total starting 2026Q1 previously). As such, we are reviewing our currency forecasts. The strong rebound in the dollar (~7% in DXY index terms) that we currently project now looks less probable. That said, we still think that the extent of Fed cuts discounted in money markets is unlikely to materialise fully, and our sense is therefore that the greenback is likely to stabilise over the coming months and recover some ground by end-2025.