Markets price a 34% chance of a 25bps July hike as softer US data contrasts with the Fed’s elevated inflation focus.
The Federal Reserve is expected to maintain rates while emphasizing persistent inflation risks, reinforcing a hawkish stance. This outlook may support US yields and the Dollar, despite recent softer economic data.
Recent US indicators fell short of expectations, with ADP employment rising 15,000 versus 16,500 forecast and wholesale inventories holding at 0.3% month-over-month, below the 0.4% consensus. Consumer confidence also dipped, with the index at 90.8 in July, down from 92.2 in June. US yields edged 4bps lower, while markets now price a 34% chance of a 25bps July hike.
A hawkish hold could sustain USD strength, potentially pressuring Asian currencies like SGD, KRW, and MYR. The Fed’s high-for-longer policy stance remains a key driver for Dollar resilience.