OCBC expects the Federal Reserve to maintain rates and remove its easing bias, capping USD downside amid stable oil prices.
The US Dollar remains directionless as traders await the Federal Reserve’s upcoming FOMC meeting, with no clear catalyst for sustained weakness. OCBC analysts note that while oil prices have slipped below USD80 per barrel, further declines may be limited due to logistical and geopolitical factors, including mine clearance and insurance reinstatement in the Strait of Hormuz.
The Fed is widely expected to hold interest rates steady for a fourth consecutive meeting and drop its easing bias. Chair Jerome Powell is likely to acknowledge persistent inflation and a resilient labor market but avoid signaling a definitive policy shift. The recent decline in oil prices provides the Fed room to maintain patience if the trend continues.
OCBC maintains a neutral stance on the Dollar, favoring relative value trades in FX crosses over outright USD positions. The lack of a bearish catalyst keeps the currency range-bound ahead of the Fed’s decision.