MUFG’s Senior Currency Analyst Lloyd Chan notes that the Federal Reserve kept policy unchanged and now signals only one rate cut in 2026, as the US-Iran war and higher energy prices complicate the outlook. The bank warns that a sustained Oil shock could push US inflation sharply higher and even trigger an insurance rate hike, keeping the Dollar supported.
Fed cautious with Dollar staying firm
“On US rates, the Fed kept policy settings unchanged, while the latest dot plot points to 1 rate cut this year.”
“The policy outlook has become more complex, with Fed Chair Powell citing uncertainty due to the US-Iran war.”
“Rising upside inflation risks from higher energy prices are colliding with signs of labour market softening, reinforcing a cautious near-term stance.”
“However, a sustained oil shock, such as a USD150/bbl scenario, could push US inflation sharply higher towards ~5%, which may elicit an insurance rate hike.”
“Against the current risk-off backdrop, the US dollar stays supported.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/usd-supported-as-fed-weighs-energy-shock-mufg-202603190623
