The USD rally cools as BBH analysts warn the currency has overshot rate expectations, with stagnant real wages curbing bets on a 50bps December Fed hike.
The Dollar Index has pulled back from its highest level since early April 2025 and BBH argues the rally has overshot what rate differentials imply, capping near-term gains. Stagnant US real wages also limit pricing of a 50bps December Fed hike, which fueled the rally after the hot October CPI. This is an analyst view, not hard data, so conviction is moderate.
The US Dollar Index has retreated from its highest level since early April 2025 as analysts at Brown Brothers Harriman suggest the recent rally has overshot interest rate differentials. Stagnant real wages are expected to limit market pricing for a 50bps Federal Reserve rate hike in December, shifting focus toward upcoming Fed commentary.
The recent rally after the hot October CPI is seen as stretched relative to interest rate differentials, and stagnant US real wages may curb expectations of a large 50bps Fed rate hike in December.
Hawkish comments from Fed speakers, which are the main focus today since upcoming data like weekly jobless claims and October existing home sales are unlikely to move the market.