DBS strategist Philip Wee argues that the US Dollar’s near-term haven support could pause unless US equities make fresh year lows. He notes that markets have stepped back from pushing the DXY Index above 100.5 after Fed Chair Jerome Powell pushed back on aggressive rate-hike bets, stressing anchored inflation expectations and reduced fears of a 1970s-style wage‑price spiral.

Haven status conditional on equity weakness

"US financial markets will likely turn cautious as the Good Friday long weekend approaches. No one can rule out the US equity market rebound in the past two days as a dead cat bounce."

"The situation is slightly different for the USD in the near term. The USD’s haven status can pause unless the S&P 500 plunges to a new year’s low."

"Markets abandoned pushing the DXY Index above the critical 100.5 level after Fed Chair Jerome Powell pushed back against Fed hike bets on higher pump prices, signalling that inflation expectations were anchored and that the Fed was not panicking about a 1970s-style wage-price spiral."

"Fed officials took Powell’s lead on the Iranian conflict, mirroring the wait-and-see approach adopted after the Liberation Day tariffs. Fed Governor Michael Barr warned that the Iranian conflict poses a double-edged sword on inflation and growth, the longer it persists."

"The Atlanta Fed GDPNow model also weakened the USD’s exceptionalism narrative by projecting a lower growth to 1.95% vs. 3% at the start of Operation Epic Fury a month ago. Friday’s US monthly jobs data will likely complement the factors that pulled the US Treasury 10Y yield down from its 7-8- month peak near 4.50%."

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