USD: Revisiting range as crude oil risk premium diminishes – BBH

Dollar Weakens as Rate Gaps Narrow

Elias Haddad of Brown Brothers Harriman highlights that recent remarks from President Trump have led investors to significantly scale back the geopolitical risk premium in crude oil. This shift has resulted in a softer US Dollar and boosted global equities and bond markets.

With the interest rate advantage of the US over other major economies diminishing, BBH anticipates the Dollar could soon approach the lower boundary of its trading range established since June 2025.

Geopolitical Factors and Market Sentiment

Excluding geopolitical influences, the US Dollar appears set to challenge the lows of its recent range, a move driven by the shrinking gap in interest rates between the US and its global peers.

Despite these developments, energy prices remain highly sensitive to news headlines, with the security of maritime routes through the Strait of Hormuz continuing to serve as a key indicator of worldwide energy risk.

As markets have rapidly reduced the war risk premium in oil, the Dollar has retreated against leading currencies, while global stocks and bonds have experienced notable gains.

(This report was generated with AI assistance and subsequently reviewed by an editor.)