A further Dollar decline looks likely this year, although economists at ING suspect this is more a story for the second half when the Fed can declare that the inflation battle is won.

A case of when, not if the Dollar declines

“The collapse of two regional banks in the US has seen the Fed take action to address financial stability, while at the same time tightening rates to address monetary stability. We expect these two positions to collide in the second half of this year, where tighter credit conditions and greater evidence of a hard landing could see the Fed cut rates 100 bp in 4Q23. It is a question of when not if the Dollar declines.”

“We favour a 1.05-1.10 range over coming months. But the European financial sector looks better positioned than the US. Higher for longer European Central Bank rates target EUR/USD at 1.15 by year-end.”