Following a series of central bank decisions throughout the week, the US Dollar (USD) has exhibited robust momentum, prompting economists at ING to scrutinize its future trajectory.
According to analysts at ING, the recent surge in the Dollar appears to be excessive. They point to a clear message conveyed by the Federal Reserve earlier in the week: while there may be some resilience in activity data, the central bank remains poised to cut rates if inflation shows signs of downward momentum. The unexpected dovish stance taken by central banks in Switzerland, with a rate cut, and the UK, displaying a less hawkish narrative, are cited as factors contributing to the Dollar’s strong performance.
However, ING economists caution against overestimating the longevity of the Dollar rally. With the dust settling after a tumultuous week for global central banks, they anticipate a potential scaling back of long USD positions in light of the Federal Reserve’s relatively dovish stance, which they believe will continue to resonate in the markets.
Looking ahead, ING’s perspective is that pivotal US data scheduled for release in March, expected in the first half of April, could pave the way for a more sustainable decline in the Dollar.
