G10 FX Talking: Dollar downtrend delayed
At a Glance
The desk's core view is that the recent Fed rate hike delay will support the dollar temporarily, particularly against lower-yielding currencies. This aligns with the belief that a 25bp increase is anticipated on September 16, which could stabilize the dollar in the short term despite downward adjustments to year-end forecasts for the euro and other currencies. Per the full note from ING, the outlook for EUR/USD has shifted to 1.16 from 1.18, reflecting the idea that a sustained decline in the dollar is now postponed until early next spring, when U.S. inflation is expected to align closer to the Federal Reserve's 2% target. With various pairs showing bearish sentiment towards the euro and bullish expectations for USD/JPY, attention is drawn to current positioning and potential market reactions leading up to the Fed decision.
Key Takeaways
Full Analysis
What the desk is arguing
The desk posits that the anticipated Fed rate hike will offer temporary support for the dollar and delay its forthcoming downtrend. Per the full note from ING, this is particularly relevant in the context of low-yielding currencies, which may struggle against a stronger dollar in the near term.
Given the expected 25bp hike, the desk emphasizes that the lower projection for EUR/USD to 1.16 suggests markets are recalibrating their expectations for the dollar's future performance, contingent also on the path of U.S. inflation.
Moreover, the desk sees continued support for the dollar in light of a flatter U.S. yield curve, which could persist into early 2027 as inflation normalizes.
Market Implications
In the wake of the Fed's anticipated rate decision, USD/JPY is positioned for potential volatility as it hovers around 155.00. Traders should watch key support and resistance levels, notably in the context of changing Japanese monetary policy that could impact USD/JPY dynamics.
AUD/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Goldman Sachs | Bullish | 0.7000 |
MUFG | Bullish | 0.7000 |
J.P. Morgan | Bullish | 0.6800 |
From the original
Articles G10 FX Talking: Dollar downtrend delayed Published 11:03 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download What we're expecting to be a 25bp Fed rate hike on 16 September should provide some temporary support for the dollar – particularly ag
Related speeches
4 itemsG10 FX Talking: Dollar upside looks limited
The desk argues that the upside potential for the US dollar appears constrained, aligning with ING's view that the Federal Reserve is unlikely to raise rates until 2027. This conclusion is based on the perceived stability of rates and theFed's commitment to price stability despite recent inflation spikes, diminishing the dollar's bullish momentum. The consensus on pairs like EUR/USD suggests a potential escalation, with estimates now favoring a return to 1.17 as unchanged Fed policy dominates the narrative. Per the full note [source], the dollar's recent strengths have largely been driven by limited guidance from the Fed, amplifying the weight of forthcoming US economic data in traders' evaluations.
FX Talking: Dancing in the dark
The desk’s outlook suggests dampened enthusiasm for the dollar amid expectations that the Federal Reserve may adopt a more lenient approach to temporary inflation pressures, limiting the currency's upward trajectory. As communicated in the recent commentary by ing, this perspective lays the groundwork for a strengthening EUR/USD later in the year, particularly as the Fed appraises its policy stance. Current indications point to a stable EUR/USD at 1.1434, which is significantly below the consensus target of 1.1750 for December 2026, underscoring potential upside for the euro.