USD: Tensions boost value – ING

Dollar Strengthens Amid Ongoing Middle East Tensions

Chris Turner from ING anticipates continued support for the US Dollar as persistent unrest in the Middle East keeps oil prices high and investors look to central banks for direction. He believes that the upcoming Federal Reserve policy meeting will likely favor the Dollar, with the Fed expected to challenge current expectations for rate cuts. Turner highlights that the DXY index is approaching the upper boundary of its nine-month range, around 100.35 to 100.40.

Market Awaits Ceasefire Developments

According to Turner, the market appears to be waiting for concrete progress toward a ceasefire before unwinding the risk premium that has been supporting both energy prices and the Dollar.

He adds that unless there is news of a diplomatic breakthrough, attention this week will remain on how central banks respond. Notably, eight G10 central banks are scheduled to announce their monetary policy decisions in the coming days.

FOMC Meeting Seen as Positive for the Dollar

Turner suggests that the Federal Reserve’s meeting this week presents an upside risk for the Dollar. He recalls that in January, the Fed indicated it wanted to see more convincing evidence of declining inflation before considering further rate reductions.

He also points out that ongoing instability in the Middle East could push US inflation to 3.5% this summer, rather than the Fed’s 2% target. As a result, the FOMC may further question market expectations for another rate cut this year, with roughly 23 basis points still factored in by year-end.

Currently, the DXY index is testing the top of its recent trading range. However, a steadier equity market at the start of the week suggests the Dollar may not break out higher just yet.

(This report was produced with assistance from an AI tool and subsequently reviewed by an editor.)