Dollar Gains Ahead as Federal Reserve Reaffirms Restrictive Policy
US Dollar forecasters at OCBC believe that Federal Reserve restraint will support dollar gains against peers, despite an earlier sell-off. According to Sim Moh Siong and Christopher Wong, the hawkish tone from Fed Chair Warsh at Jackson Hole reinforced the central bank's credibility.
The strategists also pointed to resilient US growth and sticky inflation as reasons for policy to remain restrictive, supporting the dollar and keeping the DXY on a gently higher trajectory. Market pricing has reflected this shift in focus towards inflation risks and central bank credibility.
Warsh's tone at Jackson Hole was seen as reinforcing Fed credibility, while ongoing economic resilience and high inflation should keep policy biased toward restraint. This stance is expected to provide ongoing support for the dollar into early 2027, with moderate strength still forecasted.