Dollar rebound looks unconvincing

After weakening over the preceding two weeks, the US dollar has rebounded against most other currencies this week. Nonetheless, last week’s disappointing payrolls report and the slightly less upbeat tone in recent comments from FOMC members appear to have kept a lid on the greenback. We think an announcement on tapering asset purchases will now not be forthcoming at the September FOMC meeting later this month. But with new economic forecasts and the addition of 2024 projections to the “dot plot”, that meeting may still set the tone for the dollar for the next couple of months. A repeat of the hawkish surprise at the June meeting (which was in part driven by upward revisions to the “dot” rate projections) could well revive the dollar rally.