OCBC removes final Fed rate cut projection and lifts 10Y Treasury yield forecast to 4.55% by end-2026 amid strong US growth.
The US Dollar remains resilient after May payrolls data reinforced a hawkish Federal Reserve stance, prompting OCBC to eliminate its final 25-basis-point rate cut forecast. The bank now expects no Fed easing through 2026 and raised its 10Y US Treasury yield forecast to 4.55%, up from 4.25% previously.
The shift follows a stronger-than-expected US labor market, which gives the Fed room to prioritize inflation control. Attention now turns to the June 10 US CPI report for further signals on price pressures. OCBC also highlights stronger US growth relative to Europe and non-tech Asia as a key support for the USD.
While the Dollar is expected to stay rangebound, risks lean toward further strength, driven by AI capital expenditure and potential higher-for-longer energy prices. The bank notes Asia FX divergence on policy signals and flows as a contributing factor.