Dollar Strength Persists into FOMC Meeting
The US Dollar (USD) has continued to be strong, pushing the EUR/USD exchange rate lower as risk sentiment weakened. This is a trend that could continue until the Federal Open Market Committee (FOMC) meeting later today.
According to Danske Bank's research team, Germany's September ZEW survey showed a significant improvement in current conditions, with the assessment of the current situation rising to -47.1, its highest level in three and a half years. However, expectations for future growth disappointed, remaining at 34.7.
The team believes that this is due to recent tightening in financial conditions and higher energy costs. These factors will likely take some months to affect growth, given the lag lengths in German retail energy and rate pricing.
Looking ahead to the FOMC meeting, Danske Bank's research team expects a 25bp rate hike alongside updated economic projections and dot plots. They also predict that there will be 2-3 dissenters in favor of holding rates steady.