US Dollar: Range trading persists as Fed stays on hold – Societe Generale

Societe Generale’s Kit Juckes relays Jan Groen’s view that the US economy shows resilient growth with sticky inflation, keeping the Fed on hold for now. He notes market pricing still leans toward a rate hike in early 2027. Juckes prefers fading Dollar weakness, expecting US resilience and relative rate trends to support the Dollar over time.

Fed stance and Dollar resilience

"Our US Chief Economist, Jan Groen, characterises the US economic outlook as “Resilient growth, Sticky inflation, Fed on hold” with the caveat that “late-2026 hikes are a risk if inflation re-accelerates” . The current 3.3% annual rate of ‘core PCE’ inflation, at 3.3%, is clearly too high for comfort and the 6-month annualised rate at 3.8% is worrying, albeit distorted by second-round effects of the jump in energy prices."

"Market pricing of rate hikes has backed-off a bit in the last 10 days but still looks for a hike in Q1 next year, which strikes me as consistent with Jan’s view – the Fed is on hold, but robust growth, a tight labour market and a booming equity market all represent upside risks to inflation."

"What does this mean for the dollar? Our inclination continues to be to fade dollar weakness, in the belief that a resilient US economy, in both absolute and relative terms, will support the dollar and lead to favourable relative trends in interest rates over time."

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