We're Not Chasing Dollar Weakness Here, says ING

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After a run of dollar weakness, it could be time to give up the chase says a new analysis.

ING Bank's FX research team say Thursday that although "strong gains in risk assets around the globe are putting pressure on the dollar. We are not big fans of chasing it lower just yet."

In broad terms, the dollar has weakened 1.75% already in April, which is close to the typical average USD move since June of 2025 and we're starting to see some fatigue in the main exchange rates:

GBP/USD rose to 1.36 on Thursday, but has turned lower, making this the third successive attempt to breach the level, confirming the existence of a graphical horizontal resistance area here:

This coincides with EUR/USD stalling on rises to 1.1830, where it meets its own resistance.

The net result is a dollar index, which is a broader measure of USD performance, meeting support in the run-up to 97.80. The area between 97.80 and 100 is the locus of the majority of dollar trade since April 2025.

ING says the fundamentals back these technical observations of fatigue in the dollar's two-week decline.

"US interest rates are stable rather than falling, and there is little evidence so far of foreigners selling long-term US assets or increasing dollar hedge ratios," says ING's lead FX analyst Chris Turner in a note out Thursday.

The primary driver of USD weakness has been the ceasefire in the Middle East war and news that the U.S. and Iran are ready to sit down to negotiate an end to the conflict; there is hope that a second round of direct talks will happen in the coming days.

Above: The dollar index can go lower, but it likes being above 97.80

The slide in oil and gas prices and rise in stocks indicate widespread investor relief that geopolitical risk is waning. Traditional market mechanics mean the dollar would be expected to fall under such a scenario, and it has.

"However, we question whether conditions are right for a sustained dollar decline just yet, when assessing factors like Fed policy, global growth and any evidence that foreign investors are quietly leaving US asset markets or increasing dollar hedge ratios," says Turner.

ING says incoming data suggests the U.S. economy and labour market are "holding up well... it points to a Fed comfortable with the policy rate at 3.75%, where neither the labour market is deteriorating nor are second-round inflation effects growing."

With the Fed likely to stay on hold, the interest rate channel won't burden the dollar.

"We don't see conditions in place for DXY to make an immediate return to the lows of the year at 96," says Turner.