Markets now price 44 basis points of Federal Reserve tightening by mid-2026 after recent hawkish signals from policymakers.
The US Dollar remains supported after the Federal Reserve’s hawkish pivot, with traders pricing 44 basis points of additional tightening by Q2 2026. The shift follows recent commentary from Fed officials, including Chair Kevin Warsh, signaling potential rate hikes if inflation persists.
Prior to this repricing, markets had anticipated a more dovish trajectory, with rate cuts expected in 2027 and 2028. The Fed’s Dot Plot projections showed nine of 18 members backing at least one hike this year, though the FOMC statement and Warsh’s press conference provided no explicit forward guidance.
ING analysts suggest the Dollar’s upside may be limited, citing lower energy prices from a potential US-Iran deal and a stable risk environment. The DXY index tested 100.50/60 but lacks a clear catalyst for a breakout beyond recent 12-month highs.