Fed's Neutral-Hawkish Stance Tempts USD Strength

ING's analysts, Knightley and Turner, have noted that the US Federal Reserve's decision to maintain interest rates has tempered the strength of the US Dollar. Despite market expectations for a rate hike, the Fed's neutral-hawkish stance has led to a weakening in the dollar.

The EUR/USD currency pair is now expected to trade within a 1.14-1.15 range, according to ING. A more sustained rebound in the dollar would require lower oil prices and softer US jobs and inflation data that could undermine expectations for a September rate hike.

Following the Fed's press conference, the dollar sold off slightly, reversing some of the positioning that had shifted towards a rate hike. The market is now awaiting further data to determine the likelihood of a rate hike in September.