Fed and the dollar's direction through Q3

It feels like we're heading into a period where the market's focus on Fed policy will be even more granular, especially given the recent nuanced inflation data. While a rate hike in July seems to be largely priced in, the real debate, for me, is what happens beyond that. The Fed has consistently signaled a data-dependent approach, and I think the market is underestimating the impact of any signs of softening in the labor market coupled with persistent, albeit moderating, core inflation.

My baseline scenario involves a final 25bps hike in July, followed by a prolonged pause through Q3. I'd give this about a 65% probability. This would likely lead to the DXY trading in a tighter range, perhaps between 100.5 and 102.5 for the better part of August and September, as the market digests whether the Fed's 'higher for longer' stance will truly stick, or if the cracks in the economy become more visible. A sustained break below 100.5 would, in my view, require more explicit dovish signaling or a significant negative economic surprise, which I place at a lower probability, maybe 20%. Conversely, a sustained break above 102.5, indicating a hawkish surprise beyond July, seems less likely unless inflation re-accelerates significantly, which I'd put at 15%. This isn't investment advice, just how I'm framing the probabilities around the dollar's immediate future against Fed actions.