BBH reports the US Dollar began the week weaker after a US Supreme Court tariff ruling, but says the move is not yet decisive. BBH maintains a structurally bearish view based on fiscal and trade factors, while staying cyclically neutral as USD tracks rate differentials.<\/p>\n
BBH says the ruling risks worsening US fiscal credibility and increasing trade frictions. It adds that structural drags could pull USD below what rate differentials imply, as occurred in Q2 last year.<\/p>\n
Fed funds futures fully price 50 bps of easing by year-end. BBH links this to weak labour demand, fading upside inflation risks, and softening private-sector demand.<\/p>\n
BBH says the Federal Reserve can remain patient before easing again. It cites an expected fiscal boost in Q1 from the One Big Beautiful Bill Act (OBBBA), no layoff spiral, and core services less housing PCE inflation staying between 3.2% and 3.4% since March 2025.<\/p>\n
The dollar has started the week on a softer footing after the Supreme Court ruling on tariffs, which raises concerns about the US fiscal outlook and trade policy. This reinforces our long-term bearish view, but for now, the currency is still behaving in line with interest rate differentials. This keeps our short-term outlook neutral, creating a tension between fundamental weakness and cyclical support.<\/p>\n
The main risk we see is that these structural problems could suddenly overshadow the support from interest rates, pulling the dollar down sharply. We saw this happen in the second quarter of 2025 when the dollar fell 4% even as US rates were attractive, because the market became fixated on the trade deficit. Traders should watch for a similar breakdown, where the dollar stops responding to positive rate news.<\/p>\n
Markets are confidently pricing in two full rate cuts from the Federal Reserve by the end of this year. This view is supported by a clear cooling in the labor market, with the most recent JOLTS data showing job openings have fallen to 8.2 million, their lowest level since mid-2024. With inflationary pressures also easing, the path is clear for the Fed to eventually lower rates.<\/p>\n
However, the Fed can afford to be patient, which could support the dollar in the coming weeks. The massive “One Big Beautiful Bill Act” is providing a significant fiscal boost to the economy right now, and the Fed\u2019s preferred “supercore” inflation measure has been stubbornly stuck at 3.3% since last year. This stickiness gives policymakers a strong reason to wait before cutting rates.<\/p>\n
For derivative traders, this conflict between a patient Fed and future rate cuts suggests the dollar may trade within a range. The promise of easing limits the dollar’s upside, while the Fed’s current inaction provides a floor, making strategies that profit from low volatility, like selling strangles on EUR\/USD, potentially attractive. This approach bets that the dollar will not make a decisive breakout in either direction over the next few weeks.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Supreme Court tariff ruling weakens dollar; BBH stays bearish long-term, neutral near-term amid easing expectations, patient Fed.<\/p>\n","protected":false},"author":62,"featured_media":16967,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42593","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/42593","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=42593"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/42593\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/16967"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=42593"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=42593"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=42593"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}