This week’s slew of US data releases and next week’s Jackson Hole event should leave the market better informed about the potential reaction functions of US policymakers, though our central view is that the Fed will lower rates by 25 bps in September and again before the end of the year, Rabobank’s FX senior FX strategist Jane Foley notes.

Expect a move lower to 142 on a 6-month view

“If this week’s US data releases offer more reassurances that the US economy is only slowing moderately and the Fed is not behind the curve, the USD may benefit from a little additional relief. That said, at the same time, Harris’ performance in US political opinion polls suggest more reason for investors to hesitate with respect to ‘Trump trades’.”

“If Trump’s advantage in the polls continues to slip, this could lessen the USD’s potential in the weeks ahead. On August 6 we wrote that ‘we would expect the market to return to the business of evaluating fundamentals. In our view this will likely start with a recovery in the value of the USD over the coming days, though we expect that USD/JPY can still trend lower on a 3-to-6-month view’.”