The US Dollar (USD) has entered a consolidation phase. The dollar may still struggle to find a clear direction in March, but ING economists expect the downward pressure on the dollar intensifies from the second quarter.
A higher bar for a lower dollar?
From the market's point of view, the idea that US inflation and activity data are resilient has now been fully digested. Investors are comfortable with three 25 basis point cuts between now and December as there is not enough data to become more dovish now. In the same way, rate cut seems unlikely before June. All this translates into a resistant dollar, with the EUR/USD pair trading at 1.0800which seems fair to us given market conditions.
US data will not lose any of its centrality for the markets in the new month: We're probably expected to start seeing some softening in the February data, starting with payrolls.. But while we have recently seen a moderate asymmetry in rate expectations, the reality check on bonds in February may have set the bar a little higher (“lower”, from the perspective of US data) for a new round of enthusiastic relaxation bets.
Our view remains that in the second quarter US data will be weak enough for the Dollar to fall, and we believe that the Dollar's decline will not accelerate until the summer.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
