FX Daily: Boring CPI, boring August?
At a Glance
The desk posits that the recent lackluster CPI data in the U.S. has instilled a sense of directionless trading within the FX markets as we approach the Jackson Hole Symposium. Per the full note, the unexciting 0.1% headline and 0.2% core CPI prints did little to clarify market expectations, resulting in a stronger dollar amidst hawkish positioning. Despite some dovish repricing in Fed rate expectations trimming 5bps for September, there's still 9bps priced in, indicating ongoing bullish sentiment toward the dollar. This sentiment aligns with current market consensus, which has the EUR/USD trading around 1.1419, with predictions ranging up to 1.2000 by mid-2026.
Key Takeaways
- 01Lackluster CPI data has fortified current dollar positioning, keeping markets undecided.
- 02Market expectations for Fed tightening remain cautiously optimistic amidst prevailing strong data.
- 03EUR/USD may trade within narrow ranges leading up to significant catalysts, including Jackson Hole.
- 04Firm's consensus reports reflect little divergence, with mixed forecasts suggesting cautious trading ahead.
Full Analysis
What the desk is arguing
The desk frames this as a period of potential stagnation for FX, particularly for the EUR/USD pair, which may remain locked within tight ranges as the market senses extended indecision. Sources note that market participants are increasingly reluctant to fully price out the chances of further Fed tightening, primarily due to bolstered hawkish views from Fed communications and persistent attachments to prior strong data readings.
Supporting this view, core inflation running at an annualized rate of just 1.6% undermines the case for aggressive Fed policy shifts, which suggests that the U.S. dollar's recent strength may not find immediate challenge despite mild dovish adjustments in rate expectations.
The alternative read would be more pronounced hawkish signals from the Fed or unexpected volatility in geopolitical events; however, given current pricing and sentiment, those factors appear remote.
Where it sits in our coverage
Our consensus target for EUR/USD is 1.1700, with predictions ranging from 1.1200 to 1.2000 by March 2026. Notable firm targets include: - Goldman: 1.1800 for Mar26 - Morgan Stanley: 1.2000 for Mar26 - UBS: 1.2000 for Mar26
This outlook aligns closely with the broader market consensus, especially within the lower to mid-range of expectations, reflecting a common stance shared by several firms. Notably, Deutsche Bank stands at 1.1800 for Mar26, contributing to this consensus view while others, like BofA, suggest a more bearish position at 1.1700.
How other firms see it
Several firms remain aligned with our existing view, suggesting stability within the current ranges for EUR/USD as they price in ongoing U.S. macroeconomic dynamics and Fed policy. Aligned firms include: - RBC: Supportive targets at 1.1700 for Mar26 - Stanchart: Slightly bullish with 1.1600 for Mar26.
Conversely, contrary views emerge notably from BofA, which incorporates significant downward risks into their expectations for the pair. As trading continues, keep an eye on adjunct indicators such as U.S. employment figures and ongoing ECB commentary that could impact volatility in both the dollar and the EUR/USD trades.
Market Implications
Traders should monitor EUR/USD as it approaches key support levels around 1.1400, with any adverse movements responding to unexpected Fed comments. Significant shifts may occur ahead of the Jackson Hole Symposium, where any hint of a policy pivot could stir volatility.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Société Générale | Bearish | 1.1400 |
Scotiabank | Bearish | 1.1200 |
Commerzbank | Bullish | 1.2200 |
From the original
Articles FX Daily: Boring CPI, boring August? Published 07:45 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Yesterday’s unexciting US CPI print left FX with little sense of direction into the end-August Jackson Hole Symposium. What can stop
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FX Daily: USD rally getting tired?
The desk posits that the recent USD rally appears to be losing momentum, driven by a lack of upward traction despite a backdrop of shaky risk sentiment. Per the full note [source], even with a mixed signals from US data, including a downward revision on Q1 personal spending to 0.5%, the dollar's recent gains may be over-extended, suggesting a potential correction ahead. While the upcoming days remain devoid of high-impact data, the upcoming payroll release on July 4 and CPI on July 14 could alter the USD's trajectory. Our FX consensus remains modest, indicating a divergence in views across firms that forecast strengthening against the EUR and JPY.