The  has entered a consolidative phase. The Dollar may still struggle to find clear direction in March, but economists at ING expect USD bearish pressure to intensify from the second quarter.

A higher bar for a lower Dollar?

From a market perspective, the notion of resilient US inflation and activity data has now been fully digested. Investors are comfortable with three 25 bps cuts priced in by December as there is just not enough data evidence to turn more dovish now. Similarly, a rate cut before June seems unlikely. All this is translating into a resilient Dollar, with EUR/USD trading at 1.0800, which looks fair to us given market conditions.

US data is not set to lose any of its centrality for markets in the new month: expectations are probably that we will start seeing some softening in February’s data, starting with payrolls. But while we have recently observed a dovish asymmetry in rate expectations, the bond reality check in February may have set the bar a bit higher (‘lower’, from a US data perspective) for a new round of enthusiastic easing bets.

Our view remains that 2Q is when US data will prove soft enough to take the Dollar lower, and we see a USD decline only accelerating decisively in the summer.