US FX WRAP: Dollar gains to detriment of G10 peers as FOMC awaits

The Dollar Index was firmer on Tuesday amid broader risk-off sentiment and surging oil prices, to the detriment of its G10 peers. Dollar-specific newsflow was sparse ahead of Wednesday's pivotal FOMC decision, where the Fed is widely expected to hike rates by 25bps, although such a move is not quite a foregone conclusion. There was no Fed speak amid the blackout period and little in the way of tier-one US data, while the headline NY Fed Manufacturing Index disappointed expectations for September.

G10 FX was lower across the board against the Greenback, with the Yen the clear laggard amid widening yield differentials, followed by the Kiwi. The EUR, AUD and CAD were relative outperformers, although all still weakened to varying degrees. On the Yen, US Treasury Secretary Bessent said the US has been in constant dialogue with Japan regarding intervention and used a "nominal amount" during its Yen intervention, adding that the US made tens of millions of dollars on the operation. The next major risk event for the Yen is the BoJ decision later this week.

Elsewhere, Germany's September ZEW Economic Sentiment Index underwhelmed, rising to 34.7 from 34.2 but falling short of the 37.0 forecast. In the UK, the Jobs/Wages report was mixed, with unemployment holding at 4.9% (exp. 5.0%), while the wage components were in line with expectations. Overall, the report is unlikely to materially alter expectations for Thursday's BoE meeting, where rates are expected to remain unchanged. In Asia, Chinese Retail Sales fell short of the Wall Street consensus, while Industrial Production beat expectations.