US Dollar: Staying strong as Fed expectations hold – ING

ING strategist Francesco Pesole notes the Dollar’s resilience despite lower Oil prices and improved global risk sentiment, highlighting that hawkish Federal Reserve communication is keeping the Dollar supported. Strong US labour indicators and limited impact from geopolitics reinforce expectations for an October Fed hike, with ING seeing DXY at 101.0 as a realistic near-term objective.

Fed narrative keeps Dollar supported

"The dollar continues to show very good resilience to lower energy prices and a risk-friendly environment. It’s another sign that the Fed story is dominant, and the hawkish Fedspeak is enough to keep USD in demand. Richmond Fed President Thomas Barkin, who becomes a voter in 2027, reinforced that message yesterday, arguing that a single rate hike may not be enough to bring inflation under control."

"He also noted that resilient labour market conditions should keep consumer spending supported, implying that a dovish shift among the hawks may require clearer signs of labour market softening."

"But high-frequency jobs indicators have remained strong. Initial jobless claims are back below 200k and ADP reported a bump in weekly hiring to 20k at the start of September. Consensus is starting to build around a strong September payroll print – around 80-100k."

"Geopolitics had a limited impact on FX yesterday. President Trump's UN speech generated few clear market signals, while constructive talks with Iranian delegates and the reopening of the Saudi East-West pipeline pushed Brent below $100/bbl. Whether this evolves into a more sustained decline remains to be seen. From a rates perspective, oil floating around the $90-100/bbl range is unlikely to force a dovish rethink in market expectations."

"We’ll be awaiting more headlines from New York ahead of tomorrow’s Trump-Xi meeting. The Fedspeak agenda is quiet today, and the data calendar only includes S&P Global PMIs, which matter less for markets than the ISM surveys."

"We retain the view that the dollar faces upside risks over the next couple of weeks, when a revamp of data releases can prompt markets to add bets on an October hike. In that context, DXY reaching 101.0 remains a very achievable near-term target."

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