US Dollar: Fed hike odds and asymmetric risks – DBS

FXStreet Insights Team FXStreet

DBS Group Research’s Philip Wee notes that the Dollar is trading on diverging themes versus Developed Market and Asia-ex Japan currencies, with Fed expectations central. Futures are pricing a 38% chance of a surprise rate hike at Fed Chairman Kevin Warsh’s second FOMC meeting. Wee highlights that USD bulls could be disappointed if the Fed stays on hold and ends forward guidance.

Fed pricing drives Dollar performance

"The FX market ran different themes against Developed Market and Asia-ex Japan currencies overnight, balancing monetary policy in the former and oil price relief in the latter."

"The futures market is not ruling out a surprise hike at Fed Chairman Kevin Warsh’s second FOMC meeting, which it has priced in at a 38% probability."

"The DXY basket of currencies will likely depreciate if and only if this happens."

"All said, Warsh could disappoint USD bulls as well by seeking cover to deliver nothing amid the latest retreat in oil prices and by aiming to end forward guidance to keep rates on hold without signalling a September hike."

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

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD stays defensive near 1.3300 amid pre-Fed market caution

GBP/USD stays defensive near 1.3300 in the European session on Tuesday. The pair struggles as the US Dollar (USD) sits at monthly highs amid market caution ahead of the two-day US Federal Reserve monetary policy meeting, starting later this Tuesday.

EUR/USD hangs close to monthly lows near 1.1350 on USD strength

EUR/USD is consolidating near the monthly trough, trading near mid-1.1300s in the European morning on Tuesday, undermined by persistent US Dollar demand. Traders seem hesitant and await the outcome of a two-day FOMC policy meeting before placing aggressive directional bets.

Gold languishes below $4,050; eyes further losses as focus remains on FOMC decision

Gold (XAU/USD) maintains its offered tone through the first half of the European session on Tuesday and currently trades just below $4,050, down nearly 0.80% for the day. This follows the previous day's failure to find acceptance above the $4,100 mark and suggests that the path of least resistance for the bullion remains to the downside amid a bullish US Dollar (USD) undertone.

Bitcoin slips below $64,000 as risk-off sentiment grips markets

Bitcoin (BTC) is extending its correction, trading below $64,000 at the time of writing on Tuesday after losses of over 2.5% the previous day. Institutional demand shows early signs of weakness, with spot Exchange Traded Funds (ETFs) recording a mild outflow on Monday, marking three consecutive days of withdrawals.

Indian Rupee outlook: Downtrend set to persist – Just at a slower pace

The Indian Rupee just endured its most brutal six-month stretch in years, battered by a perfect storm of global shocks. From United States (US)-India trade uncertainty to surging Oil prices and the significant outflow of Foreign Institutional Investment (FII) from the Indian stock market, every event brought nothing but pain for the Indian currency.

US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.