FX Daily: New central bank calls, unchanged EUR/USD view
At a Glance
The desk expects a rate hike from both the ECB and Fed in December, positioning itself for potential USD upside amid shifting oil prices. Per the full note from ing-think, while the EUR/USD target remains unchanged at 1.160 for year-end, the deterioration of the dollar's recent performance due to supply-side factors in the oil market underlines this sentiment. With our current consensus target for EUR/USD at 1.1684, the landscape appears set for traders monitoring the upcoming geopolitical discussions that may indirectly affect energy prices and, in turn, USD valuation.
Key Takeaways
- 01Expectations for simultaneous rate hikes by the ECB and Fed in December bolster USD outlook.
- 02EUR/USD target is unchanged at 1.160, reflecting steady positioning despite oil price vagaries.
- 03Consensus reflects broader bullish sentiment for USD against EUR, indicating potential volatility ahead.
- 04Upcoming geopolitical discussions could have critical implications for oil pricing and forex markets.
Full Analysis
What the desk is arguing
The desk maintains that the ECB and Fed are poised for rate hikes in December, contributing to USD bullish sentiment. As articulated in the commentary from ing-think, this outlook hinges on stronger economic data and elevated energy prices that may prompt the Fed to act to curb volatility.
Notably, the desk highlights the risk of a significant impact from oil market dynamics as key discussions are set between President Trump and Gulf states, further reinforcing the correlation between oil prices and currency valuations.
Where it sits in our coverage
Currently, our consensus target for EUR/USD is 1.1684, with a range spanning from 1.1200 to 1.2000. Notable targets for December 2026 from specific firms include: - socgen: 1.1400 - rbc: 1.2000 - investec: 1.1700
The desk's unchanged view on EUR/USD is closely aligned with the broader consensus but leans toward the higher end of forecasts, presenting a more bullish perspective than some firms positioned at lower targets.
How other firms see it
Several firms, such as socgen and rbc, are also predicting EUR/USD patterns that align with our view, emphasizing the underlying strength of the dollar amidst potential rate hikes. Conversely, danskebank and hsbc propose more conservative targets, assuming a weaker euro trajectory.
In conjunction with this analysis, USD/JPY remains critical to understanding the ripple effects of U.S. monetary policy adjustments and energy price fluctuations that can significantly influence market sentiment and positioning.
Market Implications
Watch closely for impacts from President Trump's meetings with Gulf state representatives, as discussions could influence oil prices and subsequently drive USD valuations, particularly against EUR and JPY pairs.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Rabobank | Bearish | 1.1000 |
ING | Bullish | 1.1300 |
MUFG | Neutral | 1.1200 |
From the original
Articles FX Daily: New central bank calls, unchanged EUR/USD view Published 07:11 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download We now expect both the ECB and the Fed to hike rates in December. Here , we discuss the reasoning for our new calls an
Related speeches
4 itemsWhy we’ve changed our Fed and ECB calls
The desk anticipates a synchronized rate hike from both the Federal Reserve and the European Central Bank in December, following recent hawkish signals from both institutions. Per the full note from Commerzbank, this shift is driven by concerns over a supply-side shock from rising energy prices amidst lingering inflationary pressures, much like the landscape seen in 2022. With the expectation for the US 10-year yield to exceed 5% by year-end, traders should brace for volatility in USD-denominated pairs that may arise from these developments. The desk observes that both central banks now appear poised to act in tandem, diverging from traditional trends in which the Fed typically leads. With this context established, the latest consensus targets for EUR/USD and GBP/USD remain in focus as market players adjust their positions accordingly.
FX Daily: Dollar’s turn to get a monetary policy lift
The desk argues that the US dollar is positioned for a supportive lift from anticipated monetary policy changes ahead, driven predominantly by a likely 25bps hike from the Federal Reserve. Per the full note, the latest CPI data points to a robust inflationary backdrop, reinforcing market expectations of continued hawkishness from the Fed. The current spot for EUR/USD is 1.1446, while recent insights show that the consensus target for March 2026 across firms hovers around 1.1700. Traders should watch for signals on broader risk sentiment, especially amid rising oil prices impacted by geopolitical tensions.