Hotter US inflation and Kevin Warsh’s impending Fed leadership drive dollar’s strongest weekly gain since March.
The US dollar climbed 1.4% last week, marking its largest weekly advance since early March, as inflation data exceeded expectations and Federal Reserve leadership shifted toward a hawkish stance. Rising yields, higher oil prices, and the closure of the Strait of Hormuz added to upward pressure on the currency.
April’s stronger-than-expected CPI and PPI prints, combined with the transition to Kevin Warsh as Fed chair, fueled expectations of tighter monetary policy. Warsh, yet to be sworn in, is seen steering the Fed toward revised forward guidance and balance sheet adjustments, with his first public remarks as chair viewed as a key catalyst for further market moves.
The shift in Fed leadership, including the departure of governor Steve Miran, signals a more hawkish board, potentially accelerating rate hike pricing. Analysts warn that any further hawkish signals from Warsh could extend the dollar’s rally and weigh on bonds.