Markets are still digesting the higher re-pricing of Fed rate expectations, and global risk assets may struggle to show any sustainable rebound for now. All this should keep the dollar mostly in demand, according to economists at ING.

US Dollar Index to return above 105

“Unless we see some explicit pushback against a 75 bps hike in July, markets may consolidate their pricing for a Fed rate around 3.50% at the end of this year, which should offer some underlying support to the dollar.”

“Global risk appetite may struggle to recover just yet, especially considering the recent developments in the gas market and lingering concerns about China’s economic outlook, all of which should continue to fuel demand for defensive dollar positions.”

"A return above 105.00 in DXY in the short term is our base case.”