The US dollar’s near-term upside is viewed as limited as markets wait for next week’s Federal Reserve and ECB meetings. A Fed move in October is largely ruled out, while a December rate rise is priced in; beyond that, expectations centre on the possibility of another increase by mid-2024, although Commerzbank does not anticipate further tightening after December. If the Fed opts for a hawkish pause, the currency could firm briefly, but any softening of the restrictive message would likely push rates expectations lower for next year and weaken the dollar.
Market Sentiment and Central Bank Expectations
The week’s calendar is dominated by second-tier US releases, with the economy’s resilience seen as already reflected in pricing, reducing the scope for the dollar to extend gains even if data beat forecasts.
Geopolitical Factors and Potential Dollar Movements
Geopolitical risk in the Middle East is also judged to be offering no fresh safe-haven boost at present. A de-escalation, by contrast, could prompt a more durable pullback in the dollar, as seen when rumoured progress briefly coincided with dips in oil and the greenback.
