FX Daily: As hawkish as it gets
Per the full note from ING, the September FOMC delivered everything a dollar bull could ask for: a 25bp hike, a dot plot with 12 of 18 members projecting one more move this year and four projecting two, and upward revisions to growth and inflation with a lower unemployment rate. Chair Kevin Warsh explicitly framed policy as having reduced a 'dose of accommodation' rather than being restrictive, which ING reads as a freedom signal: markets can fully price October (currently 13bp) and December (32bp) without the Fed pushing back. DXY rose 0.6% to a two-month high and the two-year USD swap rate jumped 10-12bp, and ING's conclusion is that EUR/USD downside risks remain with oil and risk sentiment in the driver's seat. Our own consensus sees EUR/USD at 1.1700 for Mar-26 (range 1.1200-1.2000) and USD/JPY at 155.00 for Mar-26 (range 149.00-161.71), so ING's hawkish dollar read sits against a consensus that still expects a modestly stronger euro and a modestly stronger yen over the next six months. With no high-impact events scheduled in the next 30 days for these jurisdictions, the near-term path is driven by the residual hawkish impulse and the oil price, not by scheduled data.
What the desk is arguing
ING's thesis is that the Fed has handed the dollar a structurally stronger floor, and the note's title — 'As hawkish as it gets' — is the argument in miniature. The desk frames this not as a one-day reaction but as a regime shift: the monetary policy boost has been absorbed, yet risks remain tilted to the upside because the Fed has effectively given markets permission to price more tightening.
The supporting evidence is the FOMC details themselves. The 25bp hike came with a dot plot showing 12 of 18 members projecting one more increase this year and four projecting two more, alongside higher growth and inflation projections and a lower unemployment rate. The two-year USD swap rate jumped 10-12bp despite hawkish pre-meeting positioning, and market pricing now sits at 13bp for October and 32bp for December — leaving room for a full October hike to be priced if data come in hot or oil rises further.
The alternative read would be that the Fed has simply matched market expectations and the dollar's move is a positioning flush rather than a durable repricing. ING implicitly rejects that: the note argues the commitment to price stability raises the bar for a return of the debasement trade, which is a structural, not tactical, claim about the dollar.
Where it sits in our coverage
Our consensus has EUR/USD at 1.1700 for Mar-26 (range 1.1200-1.2000), 1.1800 for Jun-26, and 1.1684 for Dec-26, versus spot at 1.1446 — so the median forecast is roughly 250 pips above current levels. The per-firm dispersion is wide and revealing:
- morganstanley is the most bullish euro at 1.2000 Mar-26 and 1.2300 Jun-26, while lloyds sits at the bottom at 1.1331 Mar-26 and 1.1200 Dec-26.
- danskebank expects 1.1866 Mar-26 then a collapse to 1.1200 Jun-26, and hsbc sees 1.1700 Mar-26 falling to 1.1000 Dec-26 — both effectively siding with ING's dollar-strength thesis on a 9-12 month horizon.
- bnpparibas revised EUR Mar-26 to 1.1600 and Dec-26 to 1.2100 on 16-Sep, and scotiabank moved to 1.1734 Mar-26 with a 1.1200 Dec-26 on 09-Sep, showing the revision flow is mixed but the Dec-26 tail is drifting dollar-bullish at several houses.
ING's near-term dollar-bullish call sits closer to the lower bound of our EUR/USD spread than to the median. The firms that align with ING's direction on Dec-26 — danskebank, hsbc, and scotiabank — are all well below the 1.1684 consensus median, while morganstanley and nomura (1.2000 Dec-26) sit at the top of the range and would need a materially different Fed path to be validated.
How other firms see it
On the dollar-bullish side, danskebank, hsbc, and scotiabank all have Dec-26 EUR/USD targets below the consensus median, consistent with ING's view that the Fed's hawkishness is durable rather than a one-meeting event. On the contrary side, morganstanley (1.2300 Jun-26), nomura (1.2000 Dec-26), and rbc (1.2000 Dec-26) all see the euro materially higher, implying they either expect the Fed to stop after this hike or expect the ECB to out-hawk the Fed.
The related cross-asset intersections are obvious but worth naming: the EUR/USD trajectory is now tightly coupled to the Fed-ECB divergence trade, and the oil price is the swing variable ING explicitly flags. USD/JPY is the other pair to watch — our consensus has it at 155.00 Mar-26 versus spot at 161.29, and the BoJ decision tomorrow may not help the yen structurally, per ING, which means the dollar-bullish impulse could express itself through the carry trade rather than through EUR/USD alone. The Bank of England is also in play: ING expects a hold today with dovish communication, which intersects through EUR/GBP and by extension through the broader dollar complex.
What the calendar says
No high-impact events are scheduled in the next 30 days for the euro, yen, or dollar jurisdictions tracked here, which means the near-term path is dictated by the residual hawkish impulse from the FOMC and by oil prices rather than by scheduled data. That absence of catalysts actually reinforces ING's argument: without a data print to force a repricing, the dollar's higher floor can persist unchallenged. The next meaningful test will be whether October and December Fed pricing can be sustained without fresh inflation evidence, and traders should watch the two-year swap spread and oil for the first signs of decay.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01ING's 'As hawkish as it gets' thesis rests on a 12-of-18 dot plot majority for one more hike and four members projecting two more, plus a 10-12bp jump in the two-year USD swap rate despite hawkish pre-positioning.
- 02EUR/USD downside risks remain per ING, with oil prices and risk sentiment in the driver's seat; our consensus median of 1.1700 for Mar-26 is roughly 250 pips above spot at 1.1446.
- 03Our per-firm EUR/USD spread runs from 1.1331 (lloyds, Mar-26) to 1.2000 (morganstanley, Mar-26), and ING's near-term view sits toward the lower bound.
- 04USD/JPY is the spillover pair to watch: our consensus is 155.00 for Mar-26 versus spot at 161.29, and ING argues a BoJ hike tomorrow won't structurally help the yen.
Market implications
Watch EUR/USD at the 1.1400 handle — a break below opens the path toward lloyds' 1.1331 Mar-26 target and validates ING's near-term bearish read, while a bounce back above 1.1500 would suggest the hawkish impulse is fading. USD/JPY at 161.29 versus a 155.00 consensus is the positioning signal to monitor: if the carry trade holds despite a BoJ hike, ING's dollar-strength thesis is confirmed across the board. With no high-impact calendar events in the next 30 days, the two-year USD swap spread and the oil price are the only real-time indicators that matter.
Risks to this view
The call is invalidated if oil prices retreat sharply, which ING explicitly names as a driver of EUR/USD downside — a sustained drop would remove the inflation-hedge bid for the dollar and allow the euro to revert toward the 1.1700 consensus. A dovish surprise from the BoE today, or a BoJ hike tomorrow that unexpectedly tightens global conditions, could also force a dollar reversal. Finally, if October Fed pricing fails to hold above 13bp without hot data, the market's implicit bet on a fully priced October hike would unwind, undermining the structural floor argument.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
BNP Paribas | Bearish | 1.1500 |
UBS | Bullish | 1.1800 |
UOB | Bullish | 1.1800 |
Articles FX Daily: As hawkish as it gets Published 07:55 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The dollar can count on a stronger floor after the Fed raised rates and signalled another hike is likely by year-end. EUR/USD downside risks remain, with oil prices and risk sentiment in the driver’s seat. The Bank of England should keep rates on hold today and can err on the dovish side with communication.
A BoJ hike tomorrow may not help the yen structurally Francesco Pesole and Frantisek Taborsky The dollar rallied across the board following Wednesday's Fed hike USD: On a structurally stronger position Everything about yesterday’s FOMC meeting was hawkish. The widely expected 25bp hike was accompanied by a dot plot showing strong consensus for another hike this year. Out of 18, 12 members project one more increase and four project two more this year.
Incidentally, growth and inflation projections were revised higher and unemployment lower. Chair Kevin Warsh didn’t give much away in the press conference, but reiterated a strong commitment to price stability and didn’t seem to indicate that policy is restrictive at current levels. In his own words, the Fed simply reduced a “dose of accommodation”.
Despite hawkish pre-meeting bets, all of that still triggered a 10-12bp jump in the two-year USD swap rate. Market pricing for October is 13bp and for December 32bp. The dollar rallied across the board, with DXY up 0.6% and at a two-month high.
We think risks are more balanced for USD now that the monetary policy boost has been absorbed, but they remain tilted to the upside in the near term. First, because such a hawkish message means – in our view – markets are given the freedom to fully price in October for the next move should data come in hot and/or oil prices rise further. Second, because the pledge of monetary discipline raises the bar for a return of the debasement trade.
Third, because oil prices still make for a supportive external environment for the dollar. Our baseline call for the coming months remains one of stabilisation around current ranges first and a softer dollar then into year-end, but is heavily reliant on a de-escalation in the Gulf. As long as oil remains supported, it’s hard to argue against the bullish USD momentum.
This morning, Asian G10 currencies are leading a small rebound, primarily driven by a recovery in US equity futures. The yen has behaved better than other low-yielders after the Fed hike, suggesting some reluctance to add JPY shorts to tomorrow’s Bank of Japan decision. As we discuss in our preview , the bar for a hawkish surprise there is fairly high – even more so after the Fed’s message.
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