The broader Dollar story is firmer now heading into next week’s Federal Reserve meeting. A hike is unlikely, and dot plots will move the market. If the blip in the disinflation process that emerged in these August figures prevents a big dovish revision of the 2023 dots, then the evidence of US economic resilience since the last projections (June) means the 2024 dots could be revised higher. It all argues against any near-term turn lower in the Greenback; that is, unless US activity data starts to disappoint.

We see DXY contracting on the back of the ECB hike, but we don’t expect the EUR/USD rally to be long-lived: the Dollar Index could be trading back around 104.50/105.00 before the Fed meeting.