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US dollar strengthens as US rate expectations rise despite Fed guidance shift
Commerzbank’s commentary links the dollar’s recovery to higher US rate expectations, even as Fed Chair Kevin Warsh continues to be skeptical about forward guidance.
Commerzbank analyst Thu Lan Nguyen said the US dollar’s reaction to Federal Reserve Chair Kevin Warsh stepping away from traditional forward guidance started with unease, but later shifted to strength as US rate expectations rose, according to FXStreet.
She said the dollar came under pressure over the summer when Warsh refrained from giving clear guidance on the future path of interest rates, as markets struggled to interpret his intentions, and that period also raised concerns about possible political pressure to keep rates artificially low.
Nguyen added that since then, US rate expectations have moved markedly higher and the dollar has recovered, even though Warsh has not changed his skeptical stance toward forward guidance.