NEW YORK, UNITED STATES — The United States dollar is expected to remain supported in the lead-up to the upcoming June Federal Open Market Committee (FOMC) meeting, as strong labour data and inflation expectations continue to shape market sentiment, according to DBS Group Research.
In its latest outlook, DBS analyst Philip Wee said stronger-than-expected US nonfarm payroll figures have significantly shifted market expectations, reducing earlier assumptions of a sustained monetary easing cycle and reopening speculation about potential rate hikes in 2026.
Recent labour market data showed the US economy added 172,000 jobs in May, well above consensus estimates of 88,000. The April figure was also revised upward from 115,000 to 172,000, reinforcing the view of continued resilience in the labour market.
Wee noted that these developments have strengthened the dollar’s position against other major currencies, including those in the Eurozone, Japan, and New Zealand, as investors adjust expectations ahead of the June 16–17 FOMC meeting.
Attention is also turning to inflation data, with markets anticipating that May consumer price index (CPI) figures could rise to 4.2% year-on-year, potentially marking a three-year high. Analysts say this would add further pressure on the US Federal Reserve as it balances inflation control with economic stability.
According to DBS, the upcoming policy meeting is no longer being viewed as a routine review, but rather a key moment that could shape market direction for the remainder of the year.
The report also highlighted concerns around potential political and institutional pressures on the Federal Reserve. It warned that the outlook for the US dollar may depend not only on economic data but also on the central bank’s ability to maintain credibility and independence under evolving leadership dynamics.
DBS further suggested that if incoming Fed Chair Kevin Warsh is unable to convincingly reinforce the institution’s independence, the dollar’s current strength could weaken after the FOMC meeting, despite short-term support.
Analysts described the current environment as a “structural stress test” for the Federal Reserve, noting that global investors are closely monitoring how US monetary policy responds to inflationary pressures and political expectations.
For now, however, stronger economic indicators continue to provide short-term support for the US dollar as markets position themselves ahead of the critical policy announcement in mid-June.
The dollar’s trajectory beyond the FOMC meeting is expected to depend on both incoming inflation data and the Federal Reserve’s communication strategy regarding future monetary policy direction.
