USD: Conflict-driven support and rate advantage – TD Securities

FXStreet Insights Team FXStreet

TD Securities strategists argue that Powell’s hawkish-leaning press conference has supported the US Dollar as markets price out 2026 Fed cuts. They expect the durability of the Middle East conflict and associated tariff and Oil shocks to be the primary driver of the USD, with extended conflict likely to reinforce risk-off dynamics and widen growth and rate differentials.

Conflict duration key for USD path

"Markets took Powell's presser on the hawkish side, pricing out Fed cuts for 2026 and supporting the USD. It is tough for central banks to commit to a path given the heightened uncertainty of the conflict on the back of tariff passthrough to prices."

"We expect the durability of the conflict to remain the primary driver of the broad USD. The longer this extends, we expect more classic risk-off behavior in markets to follow along with further USD strength."

"In terms of global vulnerabilities, the US is relatively shielded from the shock given energy independence and geographical insulation from the ME region. If this continues into the summer, the Fed will likely prioritize the inflation shock, staying on hold, while peers will face simultaneous growth and inflation shocks, pushing growth and rate differentials back in the USD’s favor."

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

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.

AUD/USD sticks to positive bias above 0.7100; lacks bullish conviction

AUD/USD trades with a positive bias for the second straight day, holding above 0.7100 in the Asian session on Friday as softer US bond yields keep US Dollar bulls on the back foot. Furthermore, hawkish RBA Governor Bullock's comments boost rate hike bets and support the Aussie. However, the Fed's hawkish outlook, along with geopolitical uncertainties, limits USD losses and caps the pair.

USD/JPY approaches 158.00 as Japanese Yen resumes decline

USD/JPY is resuming its upside in the European session on Friday, refreshing two-week highs and nearing 158.00. The Japanese Yen extends losses, despite the Bank of Japan's (BoJ) expected rate hike to 1.25% and hawkish Governor Ueda's comments, as two surprise dissents against the rate hike weigh on it.

Gold keeps the bid tone in place; still below $4,400

Gold adds to the optimism seen in the second half of the week, trading with decent gains just below the $4,400 mark per troy ounce on Friday. The precious metal’s advance finds traction in declining crude oil prices and fresh selling pressure on the US Dollar.

Why altcoin season isn't coming back — and what stole its capital

If, after two years of being frozen in ice, Katara and Sokka woke you up to the crypto market, it would seem like 100 years have passed. With Bitcoin soaring to record highs just over a year ago, everyone expected a routine altcoin season, where investors take profits from the top crypto to chase higher returns in altcoins.

BoJ Recap: Not as hawkish as expected

The BoJ raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks. Governor Kazuo Ueda said the policy phase had changed.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.