Euro: Firm Dollar keeps pressure on Euro before FOMC - Danske Bank

FXStreet Insights Team FXStreet

Danske Research Team notes that the US Dollar (USD) remained firm, pushing EUR/USD modestly lower as risk sentiment weakened. In the euro area, Germany’s September ZEW survey showed a sharp improvement in current conditions, while expectations disappointed. The team says attention now turns to the FOMC meeting, where it expects a 25bp rate hike alongside updated economic projections and dot plots.

Dollar strength persists into FOMC

"Broad USD remained on a strong footing yesterday and EUR/USD declined modestly, as risk sentiment continued to sour."

"In the euro area, the German ZEW index in September showed a markedly better assessment of the current situation, but expectations for future growth disappointed. The assessment of the current situation rose to -47.1 (cons: -52.1, prior: -61.1), which is the highest level in three and a half years. The rebound in German growth is especially due to the significant fiscal easing and a rise in manufacturing orders."

"However, expectations for future growth disappointed, as they remained at 34.7 (cons: 40.0, prior: 34.2). This likely reflects the recent tightening in financial conditions and higher energy costs. The impact of these factors will likely take some months to affect growth, given the lag lengths in German retail energy and rate pricing, which the September ZEW survey reflects well."

"In the US, the main event of the week will be the FOMC meeting tonight. Previously this week we revised our call now expecting a 25bp rate hike at the meeting. Given the current market pricing (90% probability of a hike), and the fact that we have long argued rate hikes are eventually on the horizon in any case, tightening now likely represents the path of least resistance."

"We do not think the decision is a completely done deal, and we believe there will be 2-3 dissenters in favour of a hold. We still expect the FOMC to publish its updated economic projections and 'dots', even if Warsh opts out from submitting his personal views again. In the afternoon US retail sales for August is released too."

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

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD hangs close to monthly lows, still defends 0.7100 ahead of Fed decision

AUD/USD retains its negative bias for the third straight day, defending 0.7100 while trading close to a monthly low in Wednesday's Asian session on Wednesday. The US Dollar stands firm near a two-week high as the anticipated Fed rate hike and oil-driven inflation fears continue to push US bond yields to a multi-year high. Furthermore, escalating Middle East tensions benefit the safe-haven buck and weigh on the risk-sensitive Aussie.

USD/JPY holds firm above 155.00, awaits Fed policy announcements

USD/JPY climbs to a fresh one-week high above 155.00 in the Asian session on Wednesday amid a bullish US Dollar. Oil-driven inflation fears, along with the anticipated Fed rate hike, continue to support surging US bond yields. Moreover, rising US-Iran tensions underpin the USD's reserve currency status. The pair, however, remains below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold traders seem noncommittal below $4,350; eyes Fed rate decision

Gold clings to modest intraday gains through the first half of the European session, albeit it lacks follow-through buying and remains below $4,350. The US Dollar eases from a two-week high amid some profit-taking, offering support to the commodity. Traders, however, seem hesitant to place aggressive directional bets and opt to wait on the sidelines heading into the key central bank event risk.

Cardano's bearish breakout warns of a 15% downside risk

Cardano (ADA) hovers around $0.1900 at press time on Wednesday after a 6% decline the previous day, breaking below a crucial support level. Declining on-chain activity across the Cardano ecosystem, with reduced transaction count and Real Economic Value (REV), suggests waning user demand.

Fed decision in focus

Starting with the most important, the Fed decision. Heading into the event, data showed a rather punchy US August jobs report, which, you will likely recall, triggered a hawkish Fed rate repricing in rates markets. However, the recent US August CPI print mattered more.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.