Dollar does not have to rally too far on any Fed remarks seen as less than dovish – ING

The US Dollar (USD) is the best performing G10 currency in the year to date as the market reassesses the outlook for Fed rate cuts this year. Economists at ING analyze Greenback’s outlook. 

Dollar bears require patience

We feel it is a little too early for the Fed to pump more air into the easing narrative and would probably prefer to let the data do the talking. However, the conviction is there in markets that the Fed and other major central banks will be in a position to cut later this year. This suggests that the Dollar does not have to rally too far on any Fed remarks seen as less than dovish.

For the time being, we see no reason to argue with seasonal factors which normally keep the Dollar strong through the early months of the year.

We retain a 1.0800 EUR/USD target for the end of the first quarter but expect a clearer upside path to develop through the second quarter once the first Fed cut looks imminent.