The Fed held rates steady, but two officials dissented in favor of an increase, including governor Lisa Cook. A December hike remains widely expected.
The Federal Reserve's decision to hold rates steady was widely anticipated but features dissent from Governor Lisa Cook, hinting at the possibility of a rate hike in December. This implies a hawkish tone, contributing to the bullish sentiment for the USD as terminal rate expectations remain firmly in place. Market participants should consider the implications of such dissent, which may reflect broader concerns about inflation and economic resilience heading into year-end.
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). [PUBLISHER']s view aligns more closely with the upper third — JPMorgan and ING share that framing.
How firms align
JPMorgan is aligned with the Fed's hawkish narrative, targeting 1.10 for EUR/USD by March 2026, reflecting expectations for an aggressive Fed stance. Conversely, BofA holds a contrary view with a more guarded target of 1.04, anticipating weaker Euro performance against a strong USD.
What the data shows
Recent revisions indicate a strengthening outlook for the USD in the near term, supported by the Fed's guiding signals. For more insights on the USD outlook, see /research/fed-policy-impact.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Dissent from the Fed signals bullish sentiment for the USD ahead of potential December hike.
- 02Traders should prepare for volatility as rate expectations influence positioning.
- 03Key levels include 1.10 for EUR/USD as a target to watch going into year-end.
- 04Monitor economic data releases ahead of the December meeting for any shifts in sentiment.
Market implications
Markets will be watching the approaching economic indicators closely, particularly employment and inflation data, which could solidify or hinder the December rate hike narrative. As noted, our consensus target for EUR/USD sits at 1.075, making the 1.10 level a relevant resistance point for traders.
Risks to this view
Any significant deviation from expected economic data could lead to a reconsideration of the hawkish stance, particularly if inflation shows signs of abating or employment figures weaken. Such a shift could bring targets like BofA's 1.04 back into play.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.65
Sources & References
How we cover this story