ING’s Chris Turner notes that the dollar is maintaining gains following the Federal Reserve’s hawkish shift under Kevin Warsh, with markets pricing in a tightening of around 44 bps by the second quarter of 2026. According to ING House, U.S. inflation could decline later this year, allowing the Fed to avoid a full monetary tightening cycle and keep DXY near recent 12-month highs.
Fed review limits dollar growth
“The dollar is holding its gains, but it probably doesn’t need to rise much anymore. The market currently has a Fed rate tightening of 44 basis points, priced into the second quarter of next year, which looks close to the kind of modest correction that most Fed members have been predicting in their Dot Plot forecasts. With interest rate cuts still projected for 2027 and 2028, this Fed profile confirms the tone we’ve taken in the currency discussion this month: down dollar Delayed (not abandoned).”
“Yesterday, DXY tested the top of its 12-month range at 100.50/60. And while the dollar may remain in the price, we do not see a catalyst for a major upside break. This is especially true given lower energy prices due to the signed US-Iran deal and a favorable risk environment.”
“With nine of the 18 Fed members seeing at least one rate hike this year, the Fed appears prepared to move if inflation continues to head in the wrong direction. With no indication of the future in the FOMC’s abbreviated statement or Warsh’s press conference, it will therefore be fascinating to see whether Fed members can say anything about the future policy path in their speeches. They begin next week.”
(This article was created with the aid of an artificial intelligence tool and has been reviewed by an editor.)
