"Despite the Fed having effectively told us that they will hike this year again, the USD has not been able to rally by much and market positioning is well below last year's levels.

The EUR cannot weaken by much, as the ECB has reached its self-imposed QE constraints and Draghi has to fight relaxing them one-by one. The JPY cannot weaken without a BoJ endorsement of fiscal stimulus in the absence of a long-term fiscal consolidation plan, in our opinion. GBP is actually strengthening, as the market was too short and the data has surprised to the upside. And EM FX still finds support from the Fed's policy put.

If the Fed does not hike ahead of the elections, December is the only real option, but lots of things can happen until then. A number of times this year the Fed thought that the road was clear for the next hike, but unexpected shocks kept it on hold.

We still expect the Fed to hike faster than markets are pricing (Dec this year and two more next year), which would support the USD, but do not expect a sharp USD move higher".

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