USD: Tariffs are creeping back – ING
The dollar began the week under pressure, despite the absence of a clear catalyst. Long-dated Treasury yields, which have once again regained a positive correlation with the dollar, continued to decline, but not at a faster pace than EU bond yields, ING's FX analyst Francesco Pesole notes.
Developments on the tariff front may weigh on DXY
"The recent strength in EUR/USD since the weekend appears less driven by rate differentials and more by lower yields signalling a defensive reallocation in response to growing concerns over a no-trade-deal outcome ahead of the 1 August deadline. The dollar’s weakness suggests its safe-haven status has not been restored, with markets maintaining a preference for European currencies in the context of tariff-related uncertainty."
"The US data calendar is quite light. Yesterday’s leading index for June declined by 0.3% in line with expectations, and today we’ll see two manufacturing indicators from the Philadelphia and Richmond Fed. The market impact should be limited."
"There is a case for the FX market to start responding more actively to tariff-related headlines. The defiant approach seen in the past few weeks may start to weaken with just over a week until the 1 August deadline. While we still like the chances of a USD rebound from here thanks to hawkish Fed repricing, negative developments on the tariff front could adversely impact the DXY."
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FXStreet Insights Team
FXStreet
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