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Dollar steadies as Fed tightening odds stay elevated and oil rises

Futures imply an 81.0% chance of US policy tightening in 2026, while Brent has climbed above $90 a barrel, supporting the dollar.

Reported · Written up by our desk · Major Pairs

The US dollar is getting support as geopolitical developments and expectations of Federal Reserve tightening remain in focus, even as markets have largely priced out a June rate hike, according to Action Forex.

While the futures curve has reduced near term prospects, it still anticipates tighter policy in 2026, with the probability of such an outcome estimated at 81.0%. The outlook is also linked to energy prices, as higher oil could prompt the Fed to act sooner.

Brent has climbed above $90 per barrel for the first time since early June. The analysis notes stabilizers for a prolonged oil rally appear limited for crude, but the lack of similar buffers in refined products such as petrol and diesel could keep US inflation elevated and therefore sustain the case for monetary tightening.

For currency rivals, Action Forex highlights that the euro may move on expectations for the European Central Bank, with Christine Lagarde signaling September as a potential timing window even though a deposit rate rise is not expected in July. The pound’s direction may hinge on a busy UK data calendar, while the yen remains under pressure amid carry trades supported by low volatility and rising risk appetite, despite comments from Japan’s prime minister about encouraging pension fund investment.

Latest closeWTI crude $79.00 ▼0.8%|Brent $84.94 ▼0.0%

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