Dollar Surges on Hawkish Fed Commentary
The US dollar has started the week strongly, despite lower oil prices and firmer global equities. According to ING's Francesco Pesole, hawkish remarks from Federal Reserve officials Austan Goolsbee and Alberto Musalem have supported US front-end rates.
Goolsbee warned that supply shocks combined with strong spending and AI-related investment could keep inflation persistent, adding that the path back to 2% inflation may not be painless. Musalem reinforced the hawkish message, arguing that front-loaded gradual tightening is preferable and that policy remains accommodative.
The comments supported front-end USD rates on a day when Brent briefly slipped below $100/bbl. Pesole notes that Fedspeak will continue to have the potential to break the oil-USD relationship during periods of falling energy prices, as the Fed is viewed as being more fundamentally focused on inflation while other developed central banks are seen as more sensitive to oil price dynamics.
Pesole argues that near-term risks for the dollar remain skewed to the upside, with DXY potentially reaching 101.0 before month-end.