Barring a data surprise, the only threat to strong Dollar story comes from quarter-end rebalancing flows – ING

Dollar strength emerged across the board yesterday. It is hard to argue with the strong Dollar, economists at ING report.

Strong data goes head-to-head with rebalancing flows

May's core PCE deflator is expected at a firm 0.3-0.4% MoM, consistent with the Fed's view that core inflation is not falling quickly enough. That should keep US rates and the Dollar firm. 

The challenge today will be month and quarter-end portfolio rebalancing flows. The outperformance of US equity benchmarks over the last month and quarter could generate some Dollar selling. We prefer to see rebalancing as more of a risk to a preferred view that the Dollar stays strong given what seems a clear macro story.

DXY could edge up to the 103.65 area unless fixing flows take their toll.

See – US Core PCE Bank Expectations: Fed preferred inflation measure to make little progress