USD: Dollar's glass is half empty – ING

Source Fxstreet

It is fair to say that dollar price action has been poor. Having spent the last 10 weeks discussing the breakdown in the dollar-US Treasury correlation as the 'Sell America' thesis took hold, investors noticed that the dollar was only too keen to revert to traditional correlations on Wednesday as the soft CPI sent US Treasuries higher. DXY ended the day some 0.5% weaker – a typical reaction to some bullish steepening of the US yield curve on the view that the Fed had more room to cut. For reference, the soft CPI data put about another 9-10bp back into the expected 2025 Fed easing cycle, ING's FX analyst Chris Turner notes.

DXY is pretty close to the April low at 97.90/98.00

"The dollar has also failed to enjoy any bounce on the news of progress in US-China trade negotiations. That may be because details of the deal have been very vague, but yesterday US President Trump also said that the Commerce Department would be sending out letters in the next week or so dictating 'take it or leave it' trade deals to the 20 or so countries currently involved in negotiations. This keeps the risk of a 9 July cliff-edge jump in tariffs on the table – again seen as a dollar negative."

"There are probably only two factors which are supporting the dollar in the near term. The first is that the dollar is very stretched versus rate differentials. It is hard to see it falling a lot further without another decline in short-dated US rates. It is unclear whether US PPI or initial claims will deliver those lower US rates today. The second is geopolitics. Tensions are rising in the Middle East as speculation grows over a potential Israeli attack on Iran's nuclear facilities. Oil prices have been rising this week. Higher oil prices are a dollar positive by way of the US comparative advantage in energy independence. Any further developments here could see the dollar favoured for its liquidity – although the yen and Swiss franc would be in demand too."

"DXY is pretty close to the April low at 97.90/98.00. We prefer to see that as the bottom of a trading range. But dollar price action has been poor and we are perhaps seeing the lagged impact of global portfolio re-allocation decisions, such as outright sales of US assets or increased hedge ratios. Certainly, lower short-dated US rates make it an easier decision to raise hedge ratios on US assets."

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Silver Price Forecast: XAG/USD has a strong support at $40.50Silver (XAG/USD) has reversed losses after bouncing at $40.50 earlier on Monday, with price action returning to levels right above $41.00.
Author  FXStreet
Yesterday 08: 22
Silver (XAG/USD) has reversed losses after bouncing at $40.50 earlier on Monday, with price action returning to levels right above $41.00.
placeholder
US Dollar Index Price Forecast: 100-day SMA remains a key barrierThe US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% lower around 97.60 during the European trading session on Monday.
Author  FXStreet
Yesterday 09: 20
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% lower around 97.60 during the European trading session on Monday.
placeholder
3 Red Flags for XRP in September That Could Derail a 2025 Price RallyDespite many positive predictions for XRP’s price in 2025, several on-chain data points reveal a different picture.
Author  Beincrypto
Yesterday 09: 27
Despite many positive predictions for XRP’s price in 2025, several on-chain data points reveal a different picture.
placeholder
Ethereum Price Forecast: BitMine's ETH stash surpasses $9 billion amid ETF outflow pressureEthereum (ETH) trades around $4,300 on Monday following mixed sentiment from corporate treasuries and investors in ETH exchange-traded funds (ETFs).
Author  FXStreet
14 hours ago
Ethereum (ETH) trades around $4,300 on Monday following mixed sentiment from corporate treasuries and investors in ETH exchange-traded funds (ETFs).
placeholder
U.S. August CPI Preview: Persistent Rise in Inflation, What Impact on Rate Cuts? And on US Stocks?On Thursday, the U.S. will publish August CPI data. Consensus forecasts indicate a 0.3% month-over-month increase for both headline CPI and core CPI.
Author  TradingKey
7 hours ago
On Thursday, the U.S. will publish August CPI data. Consensus forecasts indicate a 0.3% month-over-month increase for both headline CPI and core CPI.
Related Instrument
goTop
quote