ING strategists Francesco Pesole, Frantisek Taborsky and Chris Turner see upside risks for the Dollar as bond markets remain volatile and Middle East developments drive sentiment. With US data light, they argue DXY could extend gains if Iran talks stall, while pro‑cyclical G10 and EM currencies look vulnerable and USD/JPY is seen testing Japanese intervention levels.

Dollar supported by bonds and geopolitics

"We think risks remain on the upside for the dollar in this volatile bond environment. Unlike in 2025, the ongoing bear steepening of the US Treasury curve is dollar-positive, as it is being driven by rising inflation fears rather than fiscal concerns."

"With the US data calendar thinning out, the next directional cue for bonds and FX is likely to come from the Middle East. President Trump said yesterday that he had called off a strike on Iran after appeals from Gulf countries, pointing to “serious negotiations”. Yet press reports continue to highlight a wide gap between the US and Iran on peace and nuclear terms. If tangible progress fails to materialise in the coming days, DXY could push through 99.50 even without a renewed military escalation."

"Against this backdrop, the early-week rebound in pro-cyclical G10 and EM currencies versus the USD looks vulnerable, and hinges on some positive Middle East news as much as good earnings by Nvidia tomorrow."

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