US Dollar: Fed expectations support gains – BBH
Brown Brothers Harriman’s (BBH) Elias Haddad notes the US Dollar (USD) is supported by widening US-G6 yield spreads and resilient US data, which keep Federal Reserve (Fed) rate hike expectations alive in the near term.
The US Dollar has strengthened as a result of hawkish expectations surrounding the Federal Reserve's interest rate decisions, according to OCBC's analysts Sim Moh Siong and Christopher Wong. This shift is driven by rising oil prices, heightened tensions between the US and Iran, and renewed concerns about inflation. Fed Governor Christopher Barr has indicated that additional rate hikes may be necessary if inflation does not show signs of slowing down.
The stronger US Dollar is accompanied by a flattening of the yield curve, a boost in global bond yields, and a decline in gold prices. Despite some recent fluctuations, the market is pricing in a 25 basis point Federal Reserve rate hike by October. The US Dollar is expected to remain moderately favorable through early 2027.
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