USD Index: Any drops may not have legs until positive developments on the debt-ceiling negotiations – ING

Economists at ING expect the US Dollar to remain favoured near term amid the debt ceiling issue.

Adverse market event might be ultimately needed to break the political stalemate

“Stalling debt-limit negotiations in the US still weigh on sentiment. The market’s sensitivity to this topic is growing each day and there may be growing fears that an adverse market event might be ultimately needed to break the political stalemate. Such a scenario would see a material upward correction in the USD in the near term, even though the long-term outlook for the greenback would not really turn any less negative – in our view – given the prospect of large cuts by the Fed starting from late this year.”

“Today, PPI and jobless claims data, as well as speeches by FOMC members Neel Kashkari and Chris Waller will be in focus in the US. Still unstable risk sentiment suggests that any drops in the Dollar may not have legs until there are positive developments on the debt-ceiling negotiations.”