The US dollar has strengthened early this week, supported by stabilizing AI-related sentiment and positioning ahead of tomorrow’s Federal Open Market Committee (FOMC) meeting. The improved mood in AI markets has helped the dollar reconnect with broader supportive factors, including a hawkish Federal Reserve and high energy prices. Today’s focus includes the US consumer confidence index, which is expected to show a slight improvement to 81.5 from September’s plummet to 81.9. Other US economic releases include durable goods orders, new home sales, and the Richmond Fed manufacturing index.
The euro is falling back due to USD strength, with EUR/USD retaining a short-term undervaluation of around 1.0-1.5%. The eurozone calendar is light today, but the Ifo survey added to evidence of resilience extending into the fourth quarter. The European Central Bank is expected to hold rates on Thursday, with no major dovish shift anticipated.
The Reserve Bank of New Zealand is expected to hike rates by 25 basis points overnight to 3.0%, in line with consensus and market pricing. The RBNZ’s tone is expected to be hawkish, signaling further tightening ahead, though officials may avoid committing to a specific rate path due to the absence of new projections.
In the Central and Eastern European (CEE) region, rates are reconnecting with higher energy prices, despite recent weakening correlations. The regional calendar is empty until Friday, when inflation data for Poland and GDP figures for the Czech Republic and Hungary are due. CEE currencies face greater downside risk than upside potential, influenced by the Fed and ECB meetings and developments in the US-Iran conflict.