OCBC warns a clear break above the Dollar Index’s 14-month range could trigger a 2–3% rally amid hawkish Fed signals.
The US Dollar is gaining support from rising Treasury yields and a more hawkish Federal Reserve policy outlook, lifting breakout risks. Markets are pricing a more aggressive rate path, with yields climbing despite weaker oil prices, underscoring rates as the primary driver.
The Dollar Index has traded in a 14-month range, but a clear break higher could deliver 2–3% upside. Larger gains of 5% or more remain a tail risk if oil surpasses USD100 per barrel or US growth overheats, marked by falling unemployment and rising inflation expectations.
FX volatility may rise as Fed Chair Warsh adopts a leaner communication style, shifting focus to incoming data. May’s core PCE data is next, though softer oil could dampen its impact even as headline inflation is expected to hit 4.1% YoY.