US Dollar Outlook Remains Bullish Amid Tightening Risks
US Dollar outlook remains bullish despite Federal Reserve tightening risks, according to OCBC's Sim Moh Siong and Christopher Wong. The USD has been supported by higher oil prices, rising US yields, and resilient US labour data.
The strengthening of the dollar was also influenced by firmer global yields overnight, with the USDJPY exchange rate edging back towards 160. This move has kept intervention risks firmly on the radar.
US labour market data showed an initial jobless claims rise of just 1k to 199k, beating the 205k consensus and remaining below 200k for a third straight week. The decline in claims is increasingly looking like evidence of underlying labour market resilience ahead of today's payrolls report.
Softening inflation in June has given the Fed scope to remain patient and assess incoming data before adjusting policy. However, continued US economic resilience should eventually bring Fed tightening risks back into focus, underpinning our moderately bullish USD outlook over the next one to two quarters.