Central bank events in Europe gave the Dollar some support on Thursday, Francesco Pesole, FX Strategist at ING argues.
DXY may trade closer to 106.00
“The surprise rate cut by the Swiss National Bank and a dovish hold by the Bank of England reinforced the notion that central banks in Europe are way ahead of the Federal Reserve with rate cuts, a dollar-positive development. The hawkish revision in guidance by Norway’s Norges Bank went in the other direction.”
“A further softening in inflation and/or activity data in the US is now needed to close the rate gap between the Fed and other central banks, and ultimately fuel a new dollar downtrend. The next top-tier data for markets is the PCE May release on 28 June, but some activity indicators before then can steer rate expectations to a smaller extent.”
“The comparison between PMIs in Europe and the US should drive some market moves today, but we doubt there is enough to take the dollar meaningfully lower at this stage, also considering the lingering political risk in the EU. DXY may trade closer to 106.0 than 105.0 in the next few days.”
