US Dollar: Firmer into Fed decision – ING

ING strategists Francesco Pesole, Chris Turner and Frantisek Taborsky note the US Dollar (USD) has started the week on a firm footing, helped by stabilising AI sentiment, a hawkish Federal Reserve backdrop and high energy prices. They highlight US consumer confidence as key near-term drivers, and expect the Dollar to remain broadly supported around the FOMC decision.

Dollar supported into FOMC week

"The dollar has found good support early this week, as stabilising AI-related sentiment has allowed markets to reconnect with the broader supportive backdrop of a hawkish Federal Reserve and high energy prices."

"Pre-FOMC positioning may also be kicking in, with the forward-looking FX market viewing Chair Kevin Warsh's reiteration of inflation commitments as reinforcing the structural floor for the dollar. As discussed in our preview, we sympathise with this view and expect a broadly supported dollar this week."

"Today, the US calendar is rather busy. The highlight is the Conference Board consumer confidence index, which surprisingly plummeted to 81.9 in September. We expect an 81.5 print; consensus is 81.0."

"Surprises here aren’t likely to be enough to sway tomorrow’s Fed tone, but pricing for further tightening has shown some fragility of late, and evidence of deteriorating consumer mood could enter the equation. The other releases are all lower tier: September’s durable goods orders and new home sales, as well as the Richmond Fed manufacturing index."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)