US Dollar: Fed tightening keeps upside risks – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes the US Dollar (USD) is extending gains after the latest hawkish Federal Reserve (Fed) hike, even as reopening prospects for the Strait of Hormuz temper the move and weigh on Oil. With multiple Fed officials signaling further tightening and other central banks also hiking, Haddad argues the US growth advantage still skews USD risks higher versus the Euro, Pound and Japanese Yen (JPY).

Fed rhetoric supports Dollar strength

"USD is building on its post hawkish Fed hike gains. Fresh headlines that the Strait of Hormuz could soon reopen has taken some steam out of the USD rally and weighing on energy prices."

"Fed officials indicate more tightening is the pipeline. St. Louis Fed President Alberto Musalem (non-voter) said further rate hikes may be needed to curb inflation, while Chicago Fed President Austan Goolsbee (2027 voter) warned of “more aggressive and more and more front-loaded” rate hikes if demand is overheating."

"Tightening by other major central banks limits policy divergence with the Fed and suggests USD will struggle to make new cyclical highs. But the US growth advantage relative to other major economies skews USD risk to the upside. Tomorrow’s September S&P Global PMI readings will likely show US maintaining its growth edge over the Eurozone, UK, and Japan."

"More Fed officials speak today: New York Fed president John Williams, Fed Vice Chair Philip Jefferson, and Richmond Fed President Tom Barkin (2027 voter)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)