USD: Room for a rebound – ING

Last week saw the Dollar trade on the soft side amid mixed data from the US. But economists at ING remain a bit reluctant to chase the Dollar lower.

Short-term Dollar bearishness remains unconvincing

We are still reluctant to chase the Dollar lower from this point – not particularly because we expect incoming data (US CPI above all) to surprise on the upside, but because the Dollar still has to catch up with some recent market dynamics – higher US rates in particular – and the scope for further dovish repricing in the USD curve is not broad.

The big risk event for the USD this week is the June inflation report on Wednesday. A downside inflation surprise could see DXY test the 101.00 April lows, but we think that the Dollar could instead find some support into the CPI release and stabilise in the second half of the week.