The US Dollar Index (DXY) has experienced a notable retreat, with risk assets rebounding following the Iran ceasefire. According to ING’s Chris Turner, this has led to higher equities, a bullish steepening in yield curves, and broad currency gains against the US Dollar (USD) [1]. Despite the DXY gapping lower and the possibility of a further sell-off toward 98.50, Turner suggests that the strength seen in March—when the DXY rallied just over 3%—is unlikely to fully unwind, citing ongoing uncertainty and the premature nature of calling for a break under 98.00 [1].
Market participants are closely monitoring traffic flow through the Strait, as a significant increase in volume could further weigh on oil prices and potentially reverse the stagflationary investment trends observed over the past month. These trends had previously been characterized by a dramatic bearish flattening of yield curves, equity weakness, and a stronger dollar [1].
The US data calendar remains relatively light, with only the FOMC minutes scheduled for release. Federal Reserve member Philip Jefferson recently stated that monetary policy is 'well-positioned' for the current environment. Markets have begun to price in Fed rate cuts toward the end of this year, with -14 basis points priced for December, although this pricing could remain sticky around unchanged rates [1].
CONCLUSION
The DXY's recent decline reflects improved risk sentiment following the Iran ceasefire, but ING analysts believe the March rally is unlikely to fully reverse due to persistent uncertainty. Market focus remains on oil prices and Fed policy, with only modest rate cuts priced in for late 2026. Overall, the outlook for the US Dollar is cautious, with limited downside expected in the near term.