We don't really buy into the story that geopolitics has driven the dollar stronger this week. If investors were substantially more worried about military conflict at NATO's eastern border, CEE currencies would be a lot weaker, as would German equity markets. Instead, this week's dollar strength is probably a function of not enough bearish news to justify what, after all, is quite an expensive proposition in being short dollars. For example, one week interest rates for G10 currencies see the dollar paying the highest at 4.14% per annum, ING's FX analyst Chris Turner notes.

DXY looks stuck near 98 for the time being

"Instead, the US news has not been that bad. Yesterday saw the sales rate for US new homes spike back to levels last seen in early 2022. And year-end pricing for the Fed Funds rate is now 5bp above its low in mid-September."

"For today, the focus will probably be on the weekly initial jobless claims data and the August existing home sales data. On the former, another low (dollar bullish) number is expected near 230k as this data continues to correct lower from 264k a fortnight ago. That spike was attributed to fraudulent claims in Texas. Regarding the home sales data, yesterday's spike in new homes could have been a function of dealer incentives – something not available to existing home sales. Consensus is for a softer existing homes sales figure today of 3.95 million annualised rate. Any upside surprise here could lift the dollar too."

"We've also got eight Fed speakers today – starting with Stephen Miran at 1415CET. Presumably, he'll be keeping pressure on Chair Powell and the FOMC to take the policy rate lower more quickly. His views are well understood, however, and by themselves may not be enough to generate much of a move lower in the dollar today. DXY looks stuck near 98 for the time being. Some softer US data is required to feed the dollar bears again – and it is not clear that this is on the menu today."