Investing.com’s FX outlook notes that markets are absorbing several geopolitical developments, including renewed Gulf escalation, possible Russia‑Ukraine peace talks and far‑right gains in German regional elections. The analysis says resilient growth and elevated energy prices keep 60‑90 basis‑point tightening cycles priced across major economies.
The dollar, the analysis suggests, should be stronger given high energy prices and robust growth, but its performance is muted by a constructive investment environment where global equities, including emerging markets, remain firm. The inverse correlation between global equities and the dollar is described as the strongest observed, outweighing the dollar’s link to oil prices.
The outlook points to a recent sharp drop in an unspecified market, which analysts interpret as speculation on a “grand bargain” in September or October involving faster Bank of Japan tightening backed by a portfolio shift toward domestic assets by the $2 trillion GPIF national pension fund. A 155 level in USD/JPY is highlighted as a key threshold above which further consolidation may occur.
For the United States, the analysis flags Friday’s August CPI data—projected at 0.4% headline and 0.2% core month‑on‑month—as a potential catalyst for a 25‑basis‑point Fed rate hike on 16 September, currently priced with a 58% probability. Treasury market focus includes $119 billion of upcoming bill, note and bond auctions, and the start of a Treasury buy‑back operation for longer‑dated securities on Wednesday, which could weigh on the dollar if Treasury weakness emerges. With the Labor Day holiday limiting activity, the dollar is expected to drift higher within a 99.00‑99.50 range.
The euro is described as “contained.” Recent Saxony‑Anhalt election results, reflecting declining support for Chancellor Merz’s CDU, could raise coalition tensions if similar outcomes appear in other regions. Nonetheless, German infrastructure and defence spending are seen as supporting growth prospects. Eurozone Q2 growth is expected to be confirmed at 0.4% quarter‑on‑quarter, and Sentix investor confidence data is projected to rise. The analysis anticipates the ECB’s Thursday meeting could pose downside risks, keeping EUR/USD in a tight 1.1580‑1.1640 range with a bias toward the downside.
In the United Kingdom, Chancellor John Healey’s speech is expected to focus on fiscal sustainability ahead of the October 28 budget, with limited pro‑growth measures. The pound is projected to remain within a 0.8580‑0.8610 range.
The Korean won is noted to have bounced off lows at 1,335 per USD after reports that the National Pension Service may halt or reverse its forward USD/KRW sales. The analysis recalls that NPS FX hedging was introduced in June to support the won, which has appreciated about 15% since then, mirroring a similar move in 2022. Consolidation is favored in both USD/JPY and USD/KRW, with easing dollar‑selling pressure potentially allowing broader dollar support.
