US Dollar: Modest upside risk with Sintra focus – OCBC

OCBC’s Sim Moh Siong and Christopher Wong highlight that Fed Chair Kevin Warsh’s appearance at Sintra and upcoming United States (US) payrolls are key for the US Dollar (USD). They see low odds of new guidance but maintain a modestly bullish USD bias on hawkish Fed risks and stabilising labour data. Softer eurozone inflation reduces pressure on the ECB to tighten further near term.

Warsh and payrolls guide Dollar narrative

"Sintra is unlikely to deliver policy surprises, but Fed Chair Warsh’s tone on oil and labour market is key. Stable US labour data and hawkish Fed risks support modest USD upside, while softer eurozone inflation lowers pressure for near-term ECB tightening."

"Sintra Central Bank Watch: Fed Chair Warsh speaks at Sintra today, but expectations for fresh policy guidance are low after June’s FOMC press conference. The key will be his framing of recent Middle East developments and the drop in crude oil prices. Labour market signals also matter."

"The May JOLTS report supports the view that US labour conditions have stabilised after earlier softening. We retain a modest bullish bias on USD, underpinned by hawkish Fed risks."

"On the ECB side, a dovish shift from Lagarde at Sintra looks unlikely. However, softer eurozone inflation should reduce the urgency for near-term tightening following June’s hike."

"ECB officials continue to flag uncertainty around second-round effects, but several have indicated no pressing need to hike in July if energy markets remain stable."

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