Synopsis:
ING remains bullish on the USD following the March FOMC meeting, seeing no reason to change their call for two 25bp Fed cuts in 2025. The Fed’s reduction in quantitative tightening (QT) and Powell’s downplaying of recession risks supported US equities, but the rotation from US to European stocks—which had fueled EUR/USD gains—is fading. Looking ahead, key US data risks and the start of universal tariffs on April 2nd could provide fresh upside for the USD.
Key Points:
1️⃣ No Change in Fed Cut Expectations for 2025 🏦
- ING maintains its call for two 25bp cuts in 2025.
- March FOMC did not alter the fundamental USD outlook.
2️⃣ USD Bullish Case Still Intact 💵
- QT slowdown and Powell’s recession comments supported equities, but not enough to weaken the USD.
- US-to-Europe stock rotation is fading, reducing support for EUR/USD.
3️⃣ Upcoming US Data Risks Key for USD Direction 📊
- Jobs data and core PCE will test market pricing of Fed cuts.
- A lack of immediate deterioration in US data would keep USD strong.
4️⃣ April 2nd Universal US Tariffs a Key USD Catalyst 🚨
- Tariffs could drive further USD upside as markets price in trade risks.
- Protectionist policies tend to support USD demand.
Conclusion:
ING remains bullish on the USD, seeing limited downside post-FOMC and fading drivers for EUR/USD strength. The April 2nd US tariff rollout could provide another leg of support for the greenback, with key US data risks in focus before then.
