FX Daily: Dollar resilience builds
At a Glance
The desk maintains a bullish view on the dollar's resilience, driven predominantly by hawkish signals from the Federal Reserve amidst falling oil prices. Per the full note from ing-think, this environment suggests limited downside for USD, especially against the EUR as market participants remain anchored to Fed hike expectations. Recent labor market data supports expectations for a strong payroll print, further solidifying the dollar's strength. Our current consensus for EUR/USD sits at 1.1684, indicating a cautious outlook on eurozone monetary policy amid these developments.
Key Takeaways
- 01The dollar shows resilience despite declining oil prices and favorable risk sentiment.
- 02Hawkish Fedspeak, particularly from Richmond Fed President Barkin, underpins demand for USD.
- 03Labor market strength is expected to support strong payroll data later this month.
- 04Consensual targets for EUR/USD indicate cautious optimism towards the euro.
Full Analysis
What the desk is arguing
The desk argues that the dollar is likely to remain strong despite external pressures such as lower oil prices and a globally risk-on sentiment. Per the full note from ing-think, hawkish Fedspeak, particularly from Richmond Fed President Thomas Barkin, emphasizes the need for continued vigilance on inflation, aligning with the prevailing bullish sentiment for the dollar.
Barkin's comments pointed out that a single rate hike may be insufficient to curb inflation, noting resilient labor market indicators, including jobless claims below 200k and a 20k increase in initial hiring reported by ADP. This outlook implies strong Fed support for the USD, even in the face of falling oil prices that typically bolster EUR/USD.
Where it sits in our coverage
Our current consensus target for EUR/USD is 1.1684, with a range of 1.1200 to 1.2000 across various firms. Notably: - socgen: Dec-26 target at 1.1400 - investec: Dec-26 target at 1.1700 - rbc: Dec-26 target at 1.2000
The desk's view aligns with the broader consensus, which sits towards the higher end of this range, suggesting cautious optimism about the euro amid ongoing signals from the Fed.
How other firms see it
General sentiment among firms like socgen and investec aligns with our view, emphasizing potential dollar strength. In contrast, danskebank carries a more bearish outlook, with a lower target range indicating differing confidence in the eurozone's economic recovery.
The trajectory of EUR/USD remains closely linked to the ECB's rate path amidst these dynamics, while developments in USD/JPY could provide insights into market sentiment volatility.
Market Implications
Watch for EUR/USD levels around the consensus target of 1.1684, particularly as the market digests upcoming payroll data that could further influence USD strength. Continued hawkish signals from Fed officials will be crucial in shaping the dollar's trajectory in the near term.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
MUFG | Bullish | 1.1800 |
Danske Bank | Bearish | 1.1100 |
UBS | Bullish | 1.1800 |
From the original
Articles FX Daily: Dollar resilience builds Published 07:45 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The dollar has remained firm despite oil and global risk sentiment arguing for a correction. Hawkish Fedspeak remains key, and this week und
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4 itemsFX Talking: Dollar downturn delayed
The desk maintains a relatively bullish view on the dollar's strength as improvements in Middle East sentiment and sustained Fed tightening expectations suggest a delayed downturn for the greenback. As highlighted in the source commentary, the Fed's anticipated policy adjustments are likely to sustain this strength into the third quarter, with inflation remaining a persistent challenge. Given the current inflation rate exceeding 4% and robust employment data, the prospect of a dollar decline appears postponed until 2027, leading to projections for EUR/USD to potentially dip to the 1.13-1.14 level. However, the consensus remains divided, with different outlooks for major pairs like USD/JPY and EUR/USD potentially influenced by upcoming ECB and Fed decisions.
FX Daily: Dollar is on a roll
The desk reinforces the bullish sentiment on the dollar as the DXY dollar index approaches 101.80, bolstered by resilient US economic activity that continues to support Fed hawkishness. Per the full note from ing-think, recent softer-than-expected inflation data hasn't significantly altered market expectations for further rate hikes, as evidenced by a quick retracement in short-dated interest rates following the data release. With the upcoming US nonfarm payrolls and other key economic data, the backdrop remains constructive for dollar strength, particularly against the backdrop of weakening performance in EUR/USD.