Economists at ING remain doubtful that the Dollar has further to run on the Fed story. However, a resurgence in geopolitical risk means that defensive USD positions may linger.

USD helped by geopolitical uncertainty

“Markets will watch with great interest the content of the FOMC minutes today. With markets pricing in close to a 5.50% peak rate, we would essentially need to see evidence that multiple members voiced the desire to hike by 50 bps at the start of February. That would back the cause for a 50 bps move in March and likely lift the USD. However, the bar is set quite high after the recent hawkish comments, and we don’t see a very high chance of a hawkish surprise today.”

“The current instability in the geopolitical picture warrants caution and a bit more support to the Dollar may be on the cards, even though we see a good chance that the USD upside correction has peaked.”