US Dollar Draws Support From AI Relief and a Hawkish Fed – ING

Strong SK Hynix earnings and more encouraging AI sector news have helped calm concerns about an AI-driven equity correction, according to ING’s Chris Turner. Markets can consequently turn their attention back to resilient US growth, elevated inflation and higher energy prices, all of which favour the dollar. Turner expects a hawkish message from the FOMC to underpin DXY, with a potential move above 103.00.

Markets turn back to Fed as AI concerns ease

"In an otherwise bullish dollar environment, one of the key threats in recent weeks has been the AI-driven equity correction, as higher borrowing costs questioned business models – particularly those of high-yield issuers. Those fears are slowly being assuaged as the big beasts in this space continue to deliver."

"A little stability on the AI side has allowed the FX market to re-focus on the clearer and more present danger of higher energy, higher inflation and the central bank response."

"But the main event today is tonight's FOMC meeting (see our preview here). We suspect Chair Warsh will not want to tie himself in knots by citing a tightening in financial conditions, having learnt from the unruly market response to his press conference in July. Focus on restoring monetary stability should remain the dominant message and keep the dollar supported."

"DXY is edging back towards its highs of the year, where a move through 102.50 opens up 103.00."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)