Investing.com — The dollar could face downward pressure and track oil prices lower if the Federal Reserve keeps interest rates unchanged today, according to ING.
The Bloomberg dollar gauge traded down less than 0.1% on Wednesday, marking a fourth session of minimal movement despite recent volatility in oil prices. The 60-day rolling correlation between the and future prices on Wednesday dropped to its lowest level since late March.
“That resilience will be tested heavily today,” wrote Francesco Pesole, a strategist at ING. “A Fed hold should trigger an unwinding of precautionary dollar positioning, allowing the dollar to reconnect with the signal from lower oil prices.”
Traders have grown bullish on the dollar this year, becoming the most upbeat on the US currency since 2015, according to Commodity Futures Trading Commission data. The US attack on Iran disrupted global energy flows and led to a rally in oil prices, sparking global concerns about runaway inflation. Oil prices have fluctuated with developments in the six-month-long war.
Markets are fully pricing in a rate hike in September.
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