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Dollar struggles after Warsh inflation rhetoric fails to sway markets

Brown Brothers Harriman said the US yield curve steepened as front-end rate expectations fell and long-end inflation expectations rose.

Reported · Written up by our desk · Major Pairs

Brown Brothers Harriman (BBH) analyst Elias Haddad said the US dollar is finding it hard to bounce back after the Federal Reserve’s hawkish hold, noting that Fed Chair Kevin Warsh’s tough inflation rhetoric did not persuade markets.

In BBH’s view, the US yield curve steepened following Warsh’s remarks, with lower near-term rate expectations weighing on the front end while higher long-end inflation expectations lifted the back end.

BBH also pointed to higher crude oil prices supporting yields broadly, while suggesting the dollar drop reflected markets unwinding residual odds of a July hike.

The FXStreet note added that US equity futures were up slightly, supported by Microsoft’s solid earnings, even as the dollar remained under pressure.

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