OCBC Strategists Reiterate Moderate USD Strength Outlook

OCBC strategists Sim Moh Siong and Christopher Wong have revised their USD forecast in response to recent market movements. Despite an initial sell-off, they expect moderate USD strength into early 2027. The team cites several reasons for this outlook, including Fed Chair Warsh's hawkish tone at the Jackson Hole conference, resilient US economic growth, and sticky inflation.

The strategists believe that these factors will keep monetary policy restrictive, supporting the US Dollar Index (DXY) on a gently higher trajectory. They highlight market pricing after the June FOMC reaction, where investors refocused on inflation risks and central bank credibility.

Warsh's commitment to protecting anti-inflation credentials is seen as a key driver of ongoing USD support. The team notes that a resilient labor market and sticky inflation will keep policy biased towards restraint, providing further backing for the USD.