The 2 main US macro occasions yesterday (the FOMC and TIC information) left only a few marks on FX. Markets are understandably attaching restricted worth to dot plot projections given the excessive uncertainty of the tariff influence and up to date oil volatility. And whereas conserving two charge cuts within the 2025 median projection could appear reasonably dovish, the Fed sounded much less involved about progress and unemployment, ING’s FX analyst Francesco Pesole notes.
Upside dangers for USD persist
“Proper after the Fed announcement, TIC information confirmed the unwinding of international US treasury holdings in April was fairly contained (a decline of simply $36bn out of $9tr). That means a better function of home traders within the Treasury sell-off than the ‘promote America’ theme may need instructed. Anecdotal proof in de-dollarisation stays important, and a minimum of one other month of TIC information is required to get a clearer image.”
“Nevertheless, the greenback seemingly dodged a bullet with yesterday’s figures, and the dearth of conclusive proof of foreigners’ exodus from Treasuries could make markets barely extra cautious in constructing extra threat premium on the greenback. Anyway, the short-term dominating driver stays geopolitics. Media stories are actually strongly suggesting the US is making ready to instantly assault Iran, maybe as early as this weekend.”
“The entire basis of the excessive USD threat premium was the theme of US self-inflicted harm; and whereas that has critically dented USD safe-haven attraction, the mix of geopolitical dangers and excessive oil costs just isn’t US-induced dangers, and due to this fact the greenback continues to be in a extra beneficial spot than the energy-dependent safe-haven options (just like the euro) on this setting. Upside dangers for USD persist.”
