The US dollar may continue to show resilience, with any potential declines proving short-lived and modest. The Federal Reserve's hawkish stance and fragile bond markets are expected to support a slightly stronger dollar in the near term. US President Donald Trump's statement that the US won't attack Iran before the November midterms has not significantly reduced the geopolitical premium in oil prices, which remain above $100 per barrel.
In the Eurozone, the euro's recovery against the dollar remains elusive, with EUR/USD struggling to sustain gains above 1.120. The French fiscal premium continues to weigh on the euro, as reflected in the bond market. The 10-year OAT-Bund spread closed at 140 basis points, indicating persistent concerns about France's fiscal situation. Analysts suggest that EUR/USD could test the 1.110/1.112 level in the near term.
Canada's jobs report for September is expected to show a partial rebound, with payrolls projected to increase by 10,000 after a 42,000 contraction in August. However, an October interest rate hike by the Bank of Canada is considered premature. The Canadian dollar has lost around 3% against the USD in the past month but remains relatively strong within the G10 currencies. The prospect of a December hike could provide some support to the Canadian dollar.
In Central and Eastern Europe, the National Bank of Poland has indicated that a rate hike in November is unlikely, citing the government's new measure to lower fuel prices. The market reacted dovishly, but rates remained elevated. The EUR/PLN exchange rate is expected to shift to a higher trading range due to a strong US dollar and risk-off sentiment in the eurozone. Meanwhile, the National Bank of Romania kept rates unchanged at 6.50%, with EUR/RON remaining above 5.340.