US Dollar: Hawkish bias reinforces upside risks – ING

DXY is back at April 2025 levels, according to ING strategists led by Francesco Pesole. Hawkish Federal Reserve rhetoric and firmer US inflation have powered the Dollar’s advance. The team characterises the rally as rates-driven, with real front-end rate differentials sustaining its momentum. Further upside remains a risk over the coming days, with PPI a possible trigger for another USD leg higher.

April 2025 levels: Rate differentials support Dollar rally

"The combination of hawkish Fedspeak and a US CPI beat earlier this week continues to pay dividends for the dollar. DXY is now back at Liberation Day (April 2025) levels, with real front-end rate differentials continuing to fuel strong dollar momentum. Importantly, this remains a rates-driven move, with contained excessive USD strength relative to short-term fair value currently built in."

"We continue to see upside risks for the dollar in the coming days. The Fed's Chris Waller has put a 50bp December move on the radar, and that should keep markets biased towards hawkish interpretations of incoming data. December pricing remains at 28bp, leaving scope for further adjustment."

"Today’s home sales data are unlikely to matter, but tomorrow’s PPI will. That may be the catalyst for another USD leg higher."

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