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DXY seen retreating after post-May dollar rally, BBH says

Brown Brothers Harriman points to cooling US inflation data and warns that Fed Chair Kevin Warsh could fall behind the curve, helping return the DXY to a 96.0 to 100.0 range.

Reported · Written up by our desk · Major Pairs

Brown Brothers Harriman strategist Elias Haddad said the US Dollar Index, or DXY, has stabilized after a sharp sell off tied to suspected USD/JPY intervention, but argued the broader dollar rally that began in May has likely run its course.

BBH expects the DXY to retreat back into a 96.0 to 100.0 range, citing softer US inflation readings and ongoing concerns that Fed Chair Kevin Warsh may not turn inflation rhetoric into credible policy quickly enough.

The note highlights that June PCE matched expectations, with headline PCE falling 0.1% month over month versus 0.4% in May, and the annual rate easing to 3.7% from 4.1%.

BBH also pointed to Q2 real GDP growth of 1.5% SAAR and cited wage data in the form of the Q2 Employment Cost Index highlight, with wages and salaries at 3.4% year over year in Q1 consistent with the Fed’s 2% target given productivity growth.

Latest closeUSD/JPY 157.40 ▼1.7%|Dollar index 99.80 ▼0.2%

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