The US dollar (USD) is the best-performing G10 currency so far this year, as the market reassesses the prospects for Fed rate cuts this year. ING economists analyze the outlook for the dollar.
Dollar bears require patience
We think it's too early for the Fed to breathe more life into the monetary easing narrative and would probably prefer to let the data speak for itself. However, there is a belief in the markets that the Fed and other major central banks will be in a position to cut later this year. This suggests that the The dollar does not have to recover too much in the face of any comments from the Fed that are considered unmoderate.
At the moment, we see no reason to discuss the seasonal factors that normally keep the Dollar strong during the first months of the year.
We maintain the target of 1.0800 in the EUR/USD pair by the end of the first quarterbut we expect a clearer bullish path to develop during the second quarter once the first Fed cut appears imminent.
Source: Fx Street
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