A lighter week coming up for the buck

The dollar slipped back over the past week, failing to pick up any sustained support from hot September CPI data. Instead, an AI-related selloff, combined with dovish pushback from FOMC speakers, helped push October rate hike odds below 20%, leaving the DXY index to finish the week roughly half a percent lower. Elsewhere, market consternation around French fiscal risks cooled at the margin, allowing for a modest euro rebound. And perhaps more surprisingly, UK Budget headlines are still to weigh meaningfully on sterling, with the event now less than a fortnight out.

Nevertheless, we think UK-specific risks are likely to be a theme in the week ahead, and not just on the fiscal front. A raft of data, including employment, CPI, and retail sales, are all set to land over the coming days. Elsewhere, the US calendar is light, but CPI data from Canada, Japan, and New Zealand is due. The week finishes up with flash October PMIs, giving an update on the impact of higher energy as the winter heating period gets underway. Together, that would imply a somewhat quieter dollar outlook for the week ahead, with market interest tilted toward crosses.

You can read the Week Ahead in full here:

Authors:

Nick Rees, Head of Macro Research

Barry van der Laan, Senior FX Market Strategist

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