ING’s Chris Turner notes that risk assets are rebounding after the Iran ceasefire, with higher equities, a bullish steepening in yield curves and broad currency gains against the US Dollar (USD). He argues March’s Dollar strength is unlikely to fully unwind, even as US Dollar Index (DXY) has gapped lower and could fall toward 98.50, with Fed cuts only modestly priced for late 2026.

DXY slide seen limited near 98

"Expect now a close monitoring of traffic flow through the Strait, where a significant pick-up in volume would weigh further on oil prices and reverse the stagflationary investment trends witnessed in markets over the last month. These trends had been dominated by the dramatic bearish flattening of yield curves, equity weakness and a stronger dollar."

"The US data calendar is relatively light today, with only the FOMC minutes released tonight. On the subject of the Federal Reserve, Philip Jefferson was the latest member to say that monetary policy is 'well-positioned' for the current environment. Markets have now started to price back in Fed rate cuts towards the end of this year (-14bp priced for December), although pricing could prove quite sticky around unchanged rates."

"DXY rallied just over 3% through March. It has gapped lower today, and a further sell-off to 98.50 looks possible. However, there remains too much uncertainty to expect a full unwind of the March rally, and it is therefore premature to call for a break under 98.00."

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