Dollar Selloff Accelerates Amid Fed Repricing Concerns
The US Dollar's post-FOMC selloff has accelerated, with the DXY index briefly dipping below 100.0 and returning to levels seen after Kevin Warsh's June press conference.
ING's Francesco Pesole notes that the dollar's strength was largely driven by Fed hike expectations, but markets are now concerned about the Federal Reserve's willingness to translate its price stability rhetoric into effective policy tightening.
The dovish repricing of the Fed has put pressure on the dollar, which is compounded by factors such as JPY intervention and weak US data, including a 0.1% month-on-month rise in core PCE and Q2 growth at 1.5% quarter-on-quarter annualised.
Pesole warns that further USD long-squeezing is possible due to stretched net-long USD positioning versus G9, with the most stretched net-long USD positioning since January 2025 as of July 21.