Forex Today: US Dollar holds ground, markets await comments from Fed officials and US data

Here is what you need to know on Tuesday, September 29:

The US Dollar (USD) stays resilient against its major rivals following Monday's subdued action. In the second half of the day, Consumer Confidence Index for September and JOLTS Job Openings data for August will be featured in the US economic calendar. Additionally, several Federal Reserve (Fed) policymakers are scheduled to deliver speeches.

In the absence of high-impact data releases, the USD started the week on a firm footing. Growing expectations for a Fed rate hike in October and a lack of progress in resolving the conflict in the Middle East helped the currency remain supported. Early Wednesday, the USD Index clings to small gains above 101.20, while the US stock index futures trade marginally lower. Late Monday, US President Donald Trump rejected news reports claiming that his administration offered Iran access to frozen funds and a sanctions relief, as reported by Al Jazeera. Meanwhile, Iranian Foreign Minister Abbas Araghchi said that they held additional indirect talks with the US through mediators and that they expect a formal response from Washington "hopefully" on Tuesday.

UD Dollar support seen increasingly tied to stock market performance

Analysts at Commerzbank argue that the structure of US capital inflows is shifting in a way that makes currency support more sensitive to equity market dynamics. They note that “capital inflows – and thus support for the US Dollar – will be more heavily dependent on the performance of the US economy and, consequently, the US stock market.” In their view, the “US stock market is thus not only responsible for refinancing the US current account deficit but has also become the primary driver of US households’ net worth – and therefore, likely, of private consumption as well,” underscoring how closely Dollar resilience is now linked to equity valuations and household balance sheets.

During the Asian session on Tuesday, the Reserve Bank of Australia (RBA) announced that it raised the policy rate by 25 basis points (bps) tp 4.6% from 4.35%. This decision came in line with analysts' estimate. Although AUD/USD edged higher with the initial reaction, it lost its traction and was last seen losing about 0.35% on the day, slightly below 0.7000.

Audience shrugs as RBA’s hawkish tone fails to lift the Aussie

According to Commerzbank, the Reserve Bank of Australia not only delivered its latest rate hike but “made an effort in its communication to sound as hawkish as possible.” However, Commerzbank notes that the market reaction was fleeting, as “the AUD initially reacted positively to the decision but quickly gave up those small gains,” underscoring investor caution despite the RBA’s firm rhetoric.

Gold came under heavy selling pressure to start the week and lost nearly 4% on Monday, touching its lowest level since early August in the process. After coming in within a touching distance of $4,100, the precious metal corrects higher and recovers toward $4,150 in the European morning on Tuesday.

EUR/USD closed in negative territory on Monday, pressured by the broad USD strength. The pair stays relatively quiet on Tuesday and fluctuates in a tight channel above 1.1350. Later in the session, the European economic calendar will feature business and consumer sentiment data for September. Several European Central Bank (ECB) policymakers, including President Christine Lagarde, will deliver speeches in the second half of the day.

GBP/USD managed to post marginal gains on Monday but failed to gather recovery momentum. In the European morning, the pair trades in the red below 1.3250.

USD/JPY failed to make a decisive move in either direction on Monday and ended the day virtually unchanged. The pair extends its sideways grind near 157.50 early Tuesday.