A detour through the storm, same road ahead
USD View: The energy shock has delayed the timing of policy easing, but it does not alter our structural, medium-term bearish USD view. Reserve diversification, portfolio reallocation and concerns surrounding US fiscal sustainability should continue to weigh on the USD once markets fully price an extended Fed pause.
US Politics and Fed Communication: The approaching US midterm elections raise policy uncertainty and increase the odds of divided government from 2027. Meanwhile, Chair Kevin Warsh's lighter use of forward guidance has made markets more sensitive to incoming data, keeping volatility elevated across rates and FX.
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