The US dollar index (DXY) pushed to its strongest level since May 2025 after the Federal Reserve delivered its largest hawkish shift in the dot plot since the series began in 2012. In the three days following the meeting, the dollar rose 1.5%. The move came alongside disrupted diplomacy, with the signing of a Switzerland memorandum of understanding (MoU) delayed after Iran withdrew, citing Israeli attacks on Lebanon.<\/p>\n
Oil prices, however, have fallen steeply over the past month, and the IEA\u2019s latest monthly report points to an oversupplied crude market potentially extending into 2027. The agency linked part of the recent weakness to rising flows through the Strait of Hormuz, estimating shipments increased from 9.6 mb\/d in May to around 12 mb\/d in early June, supported partly by ship-to-ship transfers in the Gulf of Oman. With energy disinflation potentially strengthening into year-end and 2027, US inflation is described as near its peak and further Fed rate hikes are presented as unlikely, while the ECB is framed as retaining more scope to raise rates given differing policy settings and mandates. MUFG also forecasts EUR\/USD gains later in 2026.<\/p>\n
The US dollar has climbed to a 13-month high, with the Dollar Index (DXY) pushing past 107.50. This move is a direct reaction to the Federal Reserve’s recent dot plot, which showed a significant hawkish shift, lifting the median rate projection for year-end. The market is pricing in the Fed’s tough stance on inflation.<\/p>\n
However, we see a disconnect between this hawkishness and the sharp drop in energy prices. WTI crude has fallen over 15% in the last month to below $75 a barrel, and the IEA is forecasting a supply glut through next year. This points toward lower, not higher, inflation ahead.<\/p>\n
We believe this dollar strength presents an opportunity to position for a reversal in the coming weeks. The latest US CPI data, which showed core inflation easing to 3.2%, supports our view that inflation has peaked and the Fed will not actually hike rates. The market seems to be overreacting to the Fed’s guidance, a pattern seen in late 2018 when a hawkish Fed quickly pivoted.<\/p>\n
At the same time, the European Central Bank is facing stickier services inflation, which remains above 4%, increasing the chance of another rate hike from them. This policy divergence should put a floor under EUR\/USD, which is currently struggling below 1.0600. We would look for chances to build long positions in EUR\/USD for a recovery later this year.<\/p>\n","protected":false},"excerpt":{"rendered":"
Dollar hits 13-month high on hawkish Fed dot plot, but falling oil may cap inflation, aid euro.<\/p>\n","protected":false},"author":25,"featured_media":47966,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[24],"tags":[],"class_list":["post-49545","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.global-vtrader.com\/en\/wp-json\/wp\/v2\/posts\/49545","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.global-vtrader.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.global-vtrader.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.global-vtrader.com\/en\/wp-json\/wp\/v2\/users\/25"}],"replies":[{"embeddable":true,"href":"https:\/\/www.global-vtrader.com\/en\/wp-json\/wp\/v2\/comments?post=49545"}],"version-history":[{"count":0,"href":"https:\/\/www.global-vtrader.com\/en\/wp-json\/wp\/v2\/posts\/49545\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.global-vtrader.com\/en\/wp-json\/wp\/v2\/media\/47966"}],"wp:attachment":[{"href":"https:\/\/www.global-vtrader.com\/en\/wp-json\/wp\/v2\/media?parent=49545"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.global-vtrader.com\/en\/wp-json\/wp\/v2\/categories?post=49545"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.global-vtrader.com\/en\/wp-json\/wp\/v2\/tags?post=49545"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}