USD: Haven bid persists on Strait risks – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes that the Dollar is supported as markets focus on risks to shipping through the Strait of Hormuz and higher Oil prices. With Brent above $100 and stagflation concerns weighing on bonds and stocks, USD is near cyclical highs. Upcoming US PCE, JOLTS, and sentiment data, especially long-term inflation expectations, will guide views on Federal Reserve easing prospects.

Haven demand and US data in focus

"The rebound in crude oil prices continues to weigh on global bond and stock markets due to heightened stagflation risks and fiscal concerns. USD is up across the board with the DXY index just shy of the November 21, 2025, high. As long as the Strait is effectively shut for shipping, USD can continue to benefit from haven bid driven by dollar funding needs."

"Today’s US data lineup features January PCE, January JOLTS, and March University of Michigan consumer sentiment survey. Particular attention will fall on the sentiment survey’s long-term inflation expectations, which will help gauge whether the recent surge in energy prices is beginning to de-anchor inflation expectations."

"Consensus sees 5-10 year inflation expectations up just 0.1pts to 3.4% in March. A bigger rise would complicate the Fed’s ability to ease further, even though US labor demand is weak. Fed funds futures have already slashed rate cut expectations by year-end to 20bps from just a little over 50bps ahead of Operation Epic Fury."

"The January JOLTS data should also be closely watched to see whether a rise in the hiring rate validates January’s strong non-farm payrolls gain (+126k). The JOLTS job opening rate will also offer a forward-looking read of labor demand. In December, the job opening rate fell to 3.9%, the lowest since April 2020, indicative of a rising unemployment rate."

"Finally, markets will look past the January PCE deflator figures given the recent surge in gasoline prices is poised to lift inflation sharply in coming months and February CPI data was already released this week. Instead, the real personal spending data will provide a useful read on how resilient household demand was ahead of the jump in energy costs."

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