US Dollar: Near-term support gives way to softer outlook – ING

Inflation above 3% supports ING’s Chris Turner’s outlook for the US Dollar (USD). Alongside robust US growth and a hawkish Federal Reserve, he expects it to underpin the currency into early 2027. As headline inflation eases towards the Fed’s 2% target, he expects short-dated US rates to fall.

2027 Dollar Support Hinges on Hawkish Fed Stance

"The dollar should stay supported by strong US growth, high inflation and a Fed threatening to tighten before weakening next spring as inflation falls."

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"Our base call assumes that the Federal Reserve stays hawkish in the first quarter, as decent US growth and above-3% inflation keep money markets pricing in the threat of an extended tightening cycle."

"That turns in the second quarter, when energy-driven base effects drop out of headline inflation and a return to the Fed’s 2% inflation target sees short-dated US rates move meaningfully lower."

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