USD: Downward correction extends as policy diverges – DBS

FXStreet Insights Team FXStreet

DBS Group Research economist Philip Wee expects the Dollar’s April weakness to persist into May, as the USD’s earlier two-month rise unwinds. He notes that other major central banks, including the European Central Bank, Bank of England and Reserve Bank of Australia, are tightening policy while markets still price a prolonged Fed pause through 2026, undermining the Dollar’s relative appeal.

Fed pause contrasts with global tightening

"The market continues to price in an extended Fed pause for the rest of 2026 despite rate hikes from other major central banks."

"Unlike the Fed, the European Central Bank and the Bank of England continued to warn against second-round inflation effects, which should provide a structural floor for the EUR and GBP against a struggling USD."

"The USD’s war-related haven appeal has waned."

"The month of May will likely extend the USD’s downward correction in April, which followed its two-month rise in February and March."

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

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FXStreet Insights Team

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