ING expects the Fed’s July minutes to signal a less hawkish stance than prior Dot Plots, with DXY range-bound and USD/JPY options pricing minimal moves.
The US Dollar remains supported by elevated energy prices and higher long-end Treasury yields, though FX volatility stays low, favoring carry trades. ING’s base case anticipates no September rate hike and a marginally softer Dollar, with the DXY index confined to a tight range.
Recent trading saw longer-dated US Treasuries attract demand above 5.3% yields, though risks skew upward. The Philadelphia Semiconductor index’s 5% drop yesterday was modest compared to 2024’s daily swings, with no signs of a volatility shift yet.
Tonight’s FOMC minutes from the July meeting will be key, following a 9-3 vote for unchanged rates. The event previously triggered a dovish reaction in short-end yields and the Dollar, while long-end yields sold off. Markets suspect the full FOMC is less hawkish than the Dot Plot projections implied.