ING cites hawkish FOMC minutes and attractive carry trades as key drivers for the USD, with DXY support at 100.60 expected to hold.
The US Dollar Index (DXY) has remained resilient following weaker-than-expected June jobs data, supported by hawkish Federal Reserve signals and favorable carry trade conditions. One-week dollar deposit rates rank in the upper half of the G10, reinforcing demand for USD positions despite softer economic prints.
G7 FX volatility remains near long-term lows, encouraging carry trade activity as markets enter the summer lull. Money markets now price 31 basis points of Fed tightening this year, down from a peak of 43bp last month. Wednesday’s FOMC minutes under Chair Kevin Warsh are expected to underscore the Fed’s commitment to price stability after years of missing inflation targets.
ING analysts see USD/JPY grinding higher but acknowledge intervention risks. DXY support at 100.60 is projected to hold, with Fed hawkishness and firm US rates providing a backstop for the dollar.