Dollar Strength Continues to Dominate Markets
The dollar's strength continued to dominate markets on Wednesday, pushing sterling and the euro lower. The pound fell to 1.3292, down 0.40%, while the euro dropped to 1.1414, down 0.31%. Francesco Pesole, FX strategist at ING, noted that the dollar's resilience to softer oil prices and a risk-friendly environment is a sign of the Fed story being dominant.
According to Pesole, 'it’s another sign that the Fed story is dominant, and the hawkish Fedspeak is enough to keep USD in demand.' The Fed's hawkish tone was reinforced by Richmond Fed President Thomas Barkin, who argued that a single rate hike may not be enough to tame inflation. He also noted that resilient labour market conditions should keep consumer spending supported.
Markets are now watching the S&P Global PMIs, which carry less weight than the ISM surveys. A strong September payrolls print of 80,000-100,000 is expected, with initial jobless claims already back below 200,000 and ADP reporting a pickup in hiring in early September.
ING sees EUR/USD 'starting to look a tad cheap' given support from global equities, but notes little technical justification for fading the current decline before 1.140-1.142. The firm expects both the Fed and ECB to hold their next moves until December, with the balance of risks skewed to the downside for EUR/USD.