OCBC's strategists Sim Moh Siong and Christopher Wong keep a neutral stance on the US Dollar (USD), expecting a firm but rangebound USD profile as resilient US growth and sticky inflation support the currency. A potential US–Iran deal that reopens Hormuz is seen as USD-negative via lower Oil prices, though US outperformance should limit downside.

Neutral stance with firm Dollar bias

"We remain neutral on USD, expecting a firm but rangebound profile. The Fed is moving away from an easing bias as US growth holds up and inflation stays sticky. This supported a gradual grind higher in the USD over the past few weeks."

"Following the strong ISM manufacturing data overnight, this week’s data – including ISM services and payrolls – should reinforce the US growth resilience narrative. Fedspeak points to a shift toward a neutral stance at Chair Warsh’s first FOMC meeting "

"A potential US-Iran deal reopening the Strait of Hormuz would be USD-negative via lower oil prices, but downside should be limited by US outperformance. Our base case sees Middle East oil flows rising beyond mid-year, with prices easing into 2H26, albeit gradually. We expect Brent near USD80/bbl by year-end, with upside risks. USD terms of trade support should fade only slowly."

"There is no strong case for a bearish USD. We stay neutral and focus on crosses. Risk-sensitive oil importers such as NZD, SEK, GBP and KRW may outperform near term if energy prices ease."

"That said, we continue to prefer carry and commodity FX, including AUD, NOK and BRL. EUR and CHF are likely laggards, especially if oil prices decline only gradually."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)