More dollar weakness on the way? - BBH

Analysts at Brown Brothers Harriman explained that the US dollar advance was stopped in its tracks by the disappointingly weak Q2 GDP figures. 

Key Quotes:

"The 1.2% annualized growth rate was roughly half of the pace expected.  The FOMC statement earlier in the week did not leave the impression that a September hike was likely, and with the poor growth numbers, the odds were downgraded further. 

Now given the reduced contingent risk of a September hike, the odds of a hike 50-75 bp end of the year target range for Fed funds has fallen to about a 1 in 3 chance.  However, if you think that there is no chance of a September hike (doubts about the economic strength) or a November hike (too close to the election), then the odds of a December hike may still close to 60%. 

The Dollar Index had rallied from 93.00, the low from the day of the UK referendum to a high near 97.60 that it had tried several times over the past week or so to overcome.  The sell-off on the disappointing GDP news sent to near 95.30, which is a 50% retracement of the move and the lows after the June jobs data in early July.  The next immediate target is 94.75, which corresponds to the 61.8% retracement and also the 50% retracement of the larger move that began in early-May from near 92.00.    Below there is 94.00, which is the 61.8% retracement of the bigger move and is near where a trendline drawn off the May and June lows intersects end the end of next week."