USD: Hawkish Fed minutes support gains – MUFG

MUFG’s Senior Currency Analyst Lloyd Chan notes that the US Dollar strengthened after stronger US data and hawkish January FOMC minutes. Durable goods and capital goods orders beat expectations, while industrial production surprised on the upside. Despite dissent from two officials favouring cuts, most supported steady rates and warned against premature easing. However, markets still price two Fed cuts in 2026, potentially limiting further Dollar upside.

Dollar lifted by data and Fed minutes

"The broad US dollar index (DXY) rose 0.6%, supported by stronger than expected US macro data and a seemingly hawkish set of January FOMC minutes."

"In addition, the policy signal from the Fed minutes appeared hawkish despite the presence of dissent, anchoring near term US dollar sentiment."

"That said, market expectations for 2 Fed rate cuts later this year remain intact, particularly following the moderation in headline CPI inflation to 2.4%yoy in January from 2.7%yoy in December."

"This could help cap further upside in the US dollar."

"Against the backdrop of a seemingly hawkish set of Fed minutes, Asian currencies could remain on the defensive."

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