USD: Warsh nomination boosts recovery hopes – ING

The Dollar is poised for a potential recovery following the expected nomination of Kevin Warsh as the new Federal Reserve Chair. This development is seen as a positive sign for the Dollar, which has been seeking a catalyst for recovery. However, further positive catalysts may be necessary to sustain this momentum, especially in light of upcoming economic data releases, notes ING FX Strategist Francesco Pesole.

Warsh's nomination and Dollar outlook

"Warsh has been amongst the most market-friendly candidates, as he is a former Fed governor with a history of hawkish views, especially on balance sheet reduction. Given how adamant Trump has been on reducing rates, it’s safe to assume Warsh has taken a more dovish stance during the interview process – but this pick may suggest a desire to calm speculation on Fed independence loss."

"It appears this could at least lower the risks of another major leg lower in the dollar for now. That said, there is a clear interest in buying the EUR/USD dip around 1.190 despite plenty of signals that the USD drop is too stretched relative to rates and the macro story."

"Another positive catalyst for the USD may well be needed to break the bearish tendency and take it on a steadier recovery."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)