The DXY Index should be closer to its pre-Iran conflict levels, mirroring crude oil prices. Brent crude oil prices, which fell from above $120 per barrel at the end of April to below $80 this week, are close to their pre-conflict level of $70-72. Although the DXY depreciated to 99.5 overnight, it remained closer to 100 rather than the 97.6 level before the US-Israel attacks on Iran on February 28. Until recently, the combination of elevated oil prices, higher-than-expected nonfarm payrolls, and above-target inflation readings had encouraged markets to reprice the Fed’s previous easing bias into possible Fed hikes later this year.
Hence, the collapse in oil prices on easing geopolitical risks and improving oil supply conditions could provide Kevin Warsh an opportunity to build consensus with his Fed colleagues at his debut FOMC meeting as Fed Chair today. With the diminished war premium removing one of the strongest arguments for discussing hikes, Warsh could temper some of the “higher again” narrative towards a “high for longer” stance again without sounding dovish or being seen pandering to President Donald Trump’s public calls for lower rates. Having appointed two conservative policy experts, Paul Winfree and Daniel Heil, to help deliver on his promise of a reform-oriented Fed, Warsh could reduce forward guidance by withholding his personal rate projections and stripping predictive, forward-looking hints from his press conference. If the Fed does not out-hawk its global peers today, the USD could depreciate more readily, especially if the US 2Y bond yield slips below 4% again.
USD/CHF failed to break above 0.80 for the third time this year. The CHF was supported by Sunday’s referendum rejecting the proposal to cap Switzerland’s population at 10 million, and oil prices declining amid a formal US-Iran ceasefire deal expected this Friday that reopens the Strait of Hormuz. The Swiss National Bank will refrain from hiking its key rate, which has remained at 0% since June 2025, at its June 18 meeting. SNB President Martin Schlegel acknowledged that Swiss inflation has risen considerably less than in other countries. Although CPI inflation rose to 0.6% YoY in May from 0.1% in January, core inflation slowed to 0.4% from 0.6% in the same period, with both readings remaining subdued in the official target band of 0-2%. With the Swiss economy losing momentum on consumer demand, the SNB has an incentive to maintain an expansive monetary policy. Let’s see if Schlegel maintains the elevated readiness for FX interventions to counter the CHF’s haven appreciation driven by the Middle East conflict.
Quote of the Day
“Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed, to me:
I lift my lamp beside the golden door!”
Emma Lazarus’s sonnet on the pedestal of the Statue of Liberty
June 17 in history
In 1885, the Statue of Liberty arrived in New York Harbor as a gift from the people of France to the United States.
Topic
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates, Digital Assets or Commodities)[1]
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
[1] This disclaimer may not apply if the applicable assets fall within the definition of 'financial instruments' that are set out in Article 2(1) EU MAR (e.g. financial instruments that are traded on a regulated market, MTF or OTF, etc.). Section C of Annex I of MiFID2 specifies these 'financial instruments'.