Fed to raise rates once more in December as inflation risks stay high: Reuters poll
The latest Reuters poll indicates that the Federal Reserve is poised for another rate increase in December, driven by persistent inflation risks. This anticipated action reflects the central bank's ongoing struggle to maintain price stability as economic indicators continue to suggest upward pressure on prices. For the USD, a December hike could bolster its position, reinforcing expectations among traders and analysts alike. Understanding these dynamics is crucial now as market participants brace for potential volatility in response to Fed policies.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). The Reuters poll's indication of a December hike aligns closely with the projections from JPMorgan, affirming underlying support for the dollar.
How firms align
JPMorgan reflects an alignment with the headline's view, setting their target at 1.10 for Mar26, suggesting confidence in a stronger dollar as interest rates potentially rise. Conversely, BofA appears to take a contrarian stance with their target at 1.04 for the same tenor, showing caution in their outlook for the USD.
What the data shows
Recent discussions from firms indicate a heightened sensitivity to inflation metrics, with banks adjusting their forecasts as new data emerges. Our related Insight discusses market positioning leading into the expected rate increase, found at /research/marketpositioning.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01December hike anticipated, supporting bullish USD bias.
- 02Traders should monitor inflation data closely ahead of the Fed meeting.
- 03A breach of 1.075 could signal further USD strength.
- 04Potential volatility in FX markets as December approaches.
Market implications
Traders should watch the 1.075 level in EUR/USD as a potential pivot point ahead of the Fed's December meeting. Positioning will be key as the market reacts to incoming inflation data and subsequent commentary from Fed officials.
Risks to this view
Should inflation metrics unexpectedly soften prior to the December meeting or if economic growth indicators begin to falter, the Fed might reconsider its path, potentially reversing the current bullish sentiment on the dollar.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.75
Sources & References
How we cover this story