The prevailing sentiment for 2024 suggests a potential decline for the US Dollar, aligning with the general consensus. ING economists share this view but offer some nuanced considerations.
According to ING, a surge in short-term interest rates could actually work in favor of the Dollar in the short run. While many anticipate a downward trend for the Dollar throughout 2024, ING disagrees with the prevailing market expectation of imminent Federal Reserve rate cuts, particularly as early as March. ING suggests that a resurgence in short-term USD yields might provide temporary relief for the Dollar.
The current trend of trading within a relatively narrow range observed in January might persist in the G10 for a bit longer, according to ING. This implies that the Dollar’s trajectory, despite the broader expectation of decline, could experience some stabilizing factors in the near term, driven by a potential increase in short-term interest rates.