Hardly anyone will be interested in what the minutes of the last FOMC meeting at the end of July reveal this evening. The decisive factor for the market will be what Fed Chairman Jerome Powell says in his speech on Friday at the conference in Jackson Hole, which begins tomorrow. If he wanted to announce something, this conference would, as in the past, be a good opportunity to do so, Commerzbank's FX analyst Antje Praefcke notes.

Risks are asymmetrically distributed in the USD

"After all, the latest producer price data did not paint such a rosy picture, and retail sales in July did not indicate any restraint on the part of US consumers. Of course, one or two months' worth of data is far from sufficient to provide a comprehensive picture. However, inflation is still above target, both overall and core, the labor market is showing signs of weakness but no slump, and the economy continues to perform well despite the uncertainties surrounding tariffs and their potential impact on prices and business activity. Powell would therefore have sufficient grounds to be cautious about the pace of interest rate cuts."

"The market recently already scaled back its expectations somewhat due to the US data (for some time, 50 basis points in September were even a possible option for a large part of the market). Nevertheless, it could be that the market has gone a little too far with its expectation of almost three interest rate cuts by the end of the year. If Powell fuels doubts about these expectations on Friday, adjustments may be necessary, which are likely to lead to an upward correction in the dollar. EUR/USD could fall back towards 1.15."

"However, I fear that the risks are asymmetrically distributed in the USD. If Powell shifts to a dovish stance, the market is likely to see this as confirmation and could further lower its interest rate cut expectations, which would probably put the dollar under stronger downward pressure. An upward correction is likely to be more difficult for the dollar than further losses. As we have often written, many factors, including structural ones, are currently weighing on the greenback. It is easier to jump on the 'weaker dollar' bandwagon when there are convenient arguments than to buy it on the basis of a cautious statement by Powell. In short, it is harder for the dollar to go up than down."