Energy markets swung sharply as easing US-Iran tensions pushed Brent crude down five percent, highlighting investor caution.
ING said geopolitical volatility has largely filtered into markets through energy rather than currencies or bonds.
The dollar and US Treasuries held steady despite political pressure on the Federal Reserve, reflecting investor wariness of policy reversals.
ING FX analyst Chris Turner said criticism of the Fed could strengthen the long-term case for de-dollarisation.
“Ultimately, however, we think this attack on the Fed will add to the case for de-dollarisation,”
Chris Turner said.
Turner said upcoming US Treasury data may reveal whether foreign investors are adjusting dollar-denominated portfolios.
He noted that China has reduced US Treasury holdings in four of the past six reporting months.
ING said last year’s dollar sell-off was driven by hedge repositioning rather than large-scale asset liquidation.
The Federal Reserve’s Beige Book showed no urgency to cut interest rates.
Economic activity was flat to higher in eight of twelve Fed districts, with no clear signs of labour market weakness.
ING said markets may begin to price out a second US rate cut this year, which would support the dollar.