US Dollar: Holds gains as Fed pricing stays firm – ING

The US Dollar (USD) is experiencing gains as the Federal Reserve's pricing strategy remains consistent, according to ING’s Chris Turner. Investors are focusing on fiscal risks in France and the recalibration of the European Central Bank's (ECB) tightening measures compared to a more resilient Federal Reserve path. The US Dollar Index (DXY) has reached new yearly highs, with 102.85 identified as the next target level, buoyed by the euro's decline, which constitutes 58% of the DXY basket.

Despite mixed September jobs data on Friday, market participants appear confident in the Fed's plans for unchanged policy at the October meeting and a potential hike in December. Short-term US rates are expected to be influenced by this week's ISM services data and the release of the FOMC minutes on Wednesday. The USD's strength is further reinforced by the Fed's more robust anticipated tightening cycle relative to European central banks, particularly the ECB.

The euro (EUR) is under pressure due to independent weakness, with EUR/USD likely to remain under pressure as the ECB's tightening cycle proves more vulnerable to reevaluation than the Fed's. Geopolitical tensions, including the Middle East and Russia-Ukraine conflict, continue to weigh on the USD, although the prospect of a rate hike by the Federal Reserve provides a buffer.

Meanwhile, gold falls below $4,150 and trades range-bound, while BNB drops to around $790 amid increased bullish positioning in derivatives markets. The US services sector is expected to show modest growth, but this is unlikely to significantly impact the broader economy's resilience. EUR/USD has dropped to its lowest level since May 2025, reflecting a combination of USD strength, geopolitical uncertainty, and concerns over Europe's energy price exposure.