USD: Structural drags versus patient Fed – BBH

FXStreetFeb 23, 2026 1:48 PM

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Brown Brothers Harriman’s (BBH) Elias Haddad notes the Dollar started the week softer after the US Supreme Court tariff ruling, but stresses this move is not yet decisive. The bank keeps a structurally bearish Dollar view on fiscal and trade grounds, while staying cyclically neutral as USD trades in line with rate differentials. Fed funds futures still price 50 bps of easing by year-end, with the Fed seen able to remain patient.

Structural bearish view but cyclical neutrality

"The SCOTUS tariff ruling reinforces our structural bearish USD view because it threatens to worsen US fiscal credibility and risks fueling trade frictions. Cyclically, we remain neutral USD because the dollar is trading in line with rate differentials."

"The risk is the structural drags on USD outweigh the neutral cyclical USD backdrop and pull USD lower and further away from rate differentials, like it did in Q2 last year."

"Fed funds futures continue to fully price in a total of 50bps of easing by year-end. That remains reasonable because US labor demand is weak, upside risks to inflation are fading, and underlying domestic private-sector demand is softening."

"Nevertheless, the Fed can afford to be patient before resuming easing. A big fiscal thrust is expected over Q1 reflecting a boost from the One Big Beautiful Bill Act (OBBBA), there’s no layoff spiral underway, and core services less housing PCE inflation has been sticky between 3.2% and 3.4% since March 2025."

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

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