US Dollar Index to stay strong barring quarter and half-year end portfolio balancing flows – ING

The US Dollar Index (DXY) is steady near 105.00. Economists at ING expect the greenback to stay resilient.

Market prices a peak in dollar rates around year-end

“Today sees the May US PCE inflation data. The May US CPI data (released 10 June) really hit bond and US rate markets meaning that today's PCE may not have that large of an effect. Yet any upside surprise could nudge the dollar and US rates a little firmer.”

“Money markets now price US short-end rates peaking around year-end at 3.50% and being 25 bps lower by next summer. For us, it seems far too early to be playing the dollar bear market story. Let's see whether sticky inflation this summer needs to price Fed funds back at 4% again. But into 2023 our baseline view is that the dollar does indeed start to turn lower.”

“Barring quarter and half-year end portfolio balancing flows today, we would expect the dollar to stay strong.”