The Jackson Hole Symposium has set the stage for renewed downside pressure on the U.S. dollar, as investors increasingly position for a 25-basis point Fed rate cut in September.
However, Morgan Stanley assigns only a 50% probability to such a move, suggesting that a September cut is far from guaranteed.
Market focus is also turning to the prospects of a rate cut in October too. The market is assigning only a small chance of two cuts in a row by the Fed.
Perhaps Morgan Stanely’s outlook implies the Fed may delay the widely expected September cut until October instead.
In practice, the market impact could be similar either way. With a softer dollar and stronger equities if Powell signals in September that easing is on the way the following month.
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