ING strategists highlight Fed policy and strong US data as key drivers for the dollar, overshadowing recent declines in oil prices.
The US dollar is strengthening, supported by robust economic data and expectations of Federal Reserve policy shifts, despite a sharp drop in oil prices. ING strategists note the currency’s resilience reflects a shift in market focus toward central bank communication over energy market volatility.
Recent trading following the US-Iran deal suggests a structurally stronger dollar compared to weeks prior. However, questions remain about the sustainability of the oil sell-off, with FX markets hesitant to fully price in optimism until clearer signals emerge from policymakers.
Tomorrow’s FOMC meeting, led by new Chair Kevin Warsh, is seen as a critical juncture for currency markets. A nod from the Fed on potential rate hikes could further bolster the dollar’s position.