USD: US story doesn't justify such a strong USD – ING

The dollar’s strong performance since the start of the week has largely stemmed from negative political developments weighing on the euro and yen. These two currencies make up 71% of the DXY index, which is now at its highest since early August, ING's FX analyst Francesco Pesole notes.

Great focus on any US shutdown news

"The ongoing US government shutdown – still showing no signs of resolution – is not a dollar-positive in itself, but remains the lesser evil compared to the political woes in France and Japan. It’s also doing the dollar a favour by suspending speculation around jobs market deterioration. The big winner, anyway, remains gold, which has hit the historical $4,000 mark, and our commodity strategists see further room to run."

"Today’s FOMC minutes from the September meeting can test the dollar’s bullish momentum. The widespread perception when the Fed cut rates was that the statement and Dot Plot projections were dovish-leaning, but Fed Chair Jerome Powell’s press conference added a layer of cautiousness, defying expectations to signal a pre-set path for back-to-back cuts. The minutes will tell us where the consensus sits within the FOMC on rates, jobs and inflation. One source of downside risk for the dollar is any support for a 50bp cut. Only Stephen Miran voted for it, and Powell said there was 'no widespread support' for a half-point move, but were there other members openly discussing it?"

"When we look at the OIS-implied Fed pricing, our perception is that it’s still too cautious on easing, and we see most of the upcoming US events as bearing risks of dovish repricing and USD weakness. 45bp of easing is discounted for December, but pricing is quite conservative beyond that, with 67bp in total by the end of 1Q26. That’s where we can see some action in terms of dovish repricing. Aside from the Fed minutes, great focus will remain on any US shutdown news. Given how little the dollar has suffered from it, we think any indications of constructive interparty talks can yield only moderate and short-lived support for the greenback."