FX Daily: Looming payrolls can keep FX volatility in check
At a Glance
The desk anticipates that the imminent US payroll report will suppress FX volatility, particularly as improved sentiment in the Gulf weakens the dollar. Per the full note from ING, traders are likely adopting a wait-and-see approach ahead of payrolls, which adds to the dollar's subdued movement. Key data shows that while Brent crude prices fell significantly, US rate expectations have remained stable with a consistent 14-17 basis points priced in for September. This context may steer investments toward higher-beta currencies, effectively keeping G10 moves in check until the employment numbers are released.
Key Takeaways
- 01Imminent US payroll report is likely to keep FX volatility muted, particularly for the dollar.
- 02Stable Fed rate expectations, coupled with soft economic data, are contributing to cautious market sentiment.
- 03Gulf market sentiment weakens the dollar while supporting higher-beta currencies.
- 04Price movements among G10 currencies remain limited ahead of payrolls, indicating a wait-and-see approach.
Full Analysis
What the desk is arguing
The desk posits that the upcoming US payrolls report is likely to keep FX volatility muted, particularly for the dollar, which appears weak amidst improved Gulf market sentiment. This scenario supports a wait-and-see strategy ahead of a notoriously unpredictable data release. Per the full note from ING, such cautious sentiment is evident in the foreign exchange markets this week.
The stable expectations for Fed rate hikes, with 14-17 basis points priced for September and 30-35 basis points for December, indicate a market more focused on economic data than external factors such as energy prices. This was highlighted by the mixed performance of prior data, including a soft ADP payroll print and lower-than-expected ISM services numbers which reflect potential downside risks for the upcoming payrolls report.
Where it sits in our coverage
Our consensus sits at 1.1583 for EUR/USD, with a range spanning from 1.1200 to 1.2000. Notable targets include: - Goldman: Dec-26 target at 1.1200 - Morgan Stanley: Dec-26 target at 1.1600 - Deutsche Bank: Dec-26 target at 1.2500
This view is in line with our cross-firm consensus, although it holds slightly above the median target. The market dynamics indicate strong fragmentation among firm projections, with targets varying throughout the range.
How other firms see it
A number of firms, including Goldman and Morgan Stanley, project significantly lower targets for Dec-26, indicating a more cautious sentiment regarding the EUR/USD outlook. In contrast, Deutsche Bank appears to foresee a stronger EUR with higher targets. The divergence amongst firm projections illustrates the uncertainty surrounding key data releases, especially the upcoming payroll figures.
The EUR/USD trajectory is significantly influenced by the anticipated US payrolls report, which could provide clarity regarding future Fed policy and impact broader FX trends.
Market Implications
Traders should closely monitor the performance of EUR/USD around the 1.1583 level, especially leading into the payroll release tomorrow. This report is a potential catalyst which may prompt shifts in positioning and recalibrate risk sentiment across the FX landscape.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bearish | 1.1140 |
ABN AMRO | Bullish | 1.1500 |
Bank of America | Bullish | 1.1500 |
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Articles FX Daily: Looming payrolls can keep FX volatility in check Published 08:00 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Improved market sentiment in the Gulf has lent the dollar some weakness, but the greenback is still counting on very
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