USD: Limited USD spillover from Bessent's Fed comments - ING

Treasury Secretary Scott Bessent's comments on the Fed yesterday added fuel to dovish Fed bets, ING's FX analyst Francesco Pesole notes.

Bias remains unequivocally negative for the greenback

"The USD two-year swap rate fell another 6bp yesterday to just under 3.40%, around 10bp below pre-US CPI. Bessent said the Fed's rate should be 150-175bp lower, and that the September cut should be 50bp. Markets aren't pricing in anything over 25bp for now, and a 50bp option would probably not be taken seriously unless there are some hints in that direction at the Jackson Hole symposium (21-23 August), or August jobs data hugely disappoints again."

"The dollar had already started the day on the back foot yesterday, and it seemed unfazed by Bessent's Fed comments. What might have helped the greenback was Bessent's disagreement with EJ Antoni's idea to reduce the frequency of jobs reports. Today's highlight is July's PPI, which is expected to have risen by 0.2% both on the headline and core series. That should reinforce markets' view that the inflation bump is tolerable from a Fed perspective. The other release we'll watch is continuing claims, which spiked to 1974k last week. "

"The proximity to tomorrow's Trump-Putin meeting might argue against adding much more USD shorts just yet. But the bias remains unequivocally negative for the greenback."