USD: Waiting to be lifted by tariffs - ING

The US is due to announce a new historic round of tariffs on trading partners on Wednesday, which President Trump has now famously dubbed 'liberation day', ING's FX analysts Francesco Pesole notes.

Support around 104 is more likely than another leg lower

"What the FX market is indicating through spot, options, and positioning is a greater focus on the domestic implications for the US rather than on the countries being targeted with tariffs. There may also be a lack of trust in Trump's ability to keep tariffs in place for very long, given the inflation and activity risks. Our view is a bit more pessimistic from a sentiment perspective."

"We see some upside potential for the dollar this week as markets may have turned a bit too sanguine on the tariff view, and Trump has suggested over the weekend that he will impose tariffs on all countries. We think the risks are skewed towards a stronger dollar and yen and weaker European currencies alongside the Australian and New Zealand dollars."

"We could start seeing some support for the greenback today as defensive positions are built into Wednesday's tariff event. We think some support around 104 is more likely than another leg lower in DXY."