Dollar to see another leg higher on hints of higher-than-expected neutral policy rate – BofA

Economists at the Bank of America analyze how the Jackson Hole conference could influence the direction of the US Dollar.

Possibility of rate cuts could drag USD down

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.

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.