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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
The market reacted to a softer-than-expected US CPI print by pushing the DXY dollar index down by 0.5%, signaling a recalibration of Fed tightening expectations. Per the full note from ING, this release has prompted a 10bp reduction in projected Fed rate increases, reflective of market sentiment that a pause in rate hikes is more plausible. Additionally, various high-yield commodity currencies are poised to benefit from this inflation backdrop. This sentiment comes ahead of today's PPI data and further Federal Reserve commentary, which may reinforce or mitigate the dollar’s current trajectory.
The desk views the recent CPI release as a pivotal moment for the dollar, marking a shift in expectations surrounding Federal Reserve tightening. Per the full note from ING, the central bank is signalling the need for several additional soft inflation prints to justify maintaining the current monetary policy stance.
This shift in market positioning is evident as the expected Fed tightening has diminished, with just 44bp of tightening still priced in until next year. Today’s PPI data will further inform this debate, particularly as its components feed into the core PCE measure that the Fed closely monitors.
Currently, for the EUR/USD pair, we have a consensus target of 1.1700 with firms like goldman and deutschebank projecting 1.1800 for March 2026 while citi holds a more conservative outlook at 1.1300. In contrast, for USD/CAD, the consensus target stands at 1.3500 with several firms like scotiabank and mufg placing similar estimates for the same horizon.
This view aligns with the recent downward adjustment seen across many firms but remains distinctly at the upper end of our coverage limits, especially for EUR/USD where citi diverges significantly with 1.1300.
A mix of firms reflects broad agreement with softer dollar sentiments, with firms like goldman and deutschebank leaning towards a weaker dollar outlook based on inflation trends. In contrast, citi holds a more cautious stance, projecting higher levels for EUR/USD and USD/CAD.
Market participants should also keep an eye on related dynamics, such as the BoC's outlook for USD/CAD and the response of European monetary policy, especially in this evolving inflation narrative.
A quiet calendar ahead may leave investors reactive to market sentiment, particularly how today's PPI figures are digested by traders before the anticipated core PCE reading at the end of the month.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should pay close attention to the PPI release today and how it might alter the market's view on future Fed actions. A breach below 1.1400 in EUR/USD could signify strengthened bearish momentum for the dollar.
Risks to this view
A significant rebound in PPI data or unexpected Fed communications emphasizing a more aggressive tightening stance could erode the recent bullish sentiment towards high-yielding commodity currencies, reversing current dollar weakening.
| Firm | Stance | YE 2026 |
|---|---|---|
Bank of America | Bullish | 1.2200 |
ING | Bearish | 1.1300 |
UOB | Neutral | 1.1450 |
All 28 desk targets for EUR/USD
Articles FX Daily: Benign CPI takes sting out of dollar’s upside Published 07:45 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The DXY dollar index sold off 0.5% on yesterday's benign US CPI print and 10bp came out of the expected Fed tightening cycle. Fed officials look to be on the same page, requiring several soft inflation prints to avoid tightening, but the June data must be welcome. Today's focus will be PPI and further Fed testimony.
High-yielding commodity FX should do well Chris Turner , Francesco Pesole and Frantisek Taborsky US inflation came in lower than expected USD: Softer CPI keeps a Fed hold in play Yesterday's release of softer-than-expected June CPI was welcomed by asset markets across the board. As James Knightley writes , the softening in prices was broad-based and is a vote in the direction of ING's house call that the Fed will not be hiking this summer after all. Yet, as Chair Kevin Warsh and many Fed members will agree, one number does not a new trend make.
And another good speech from Chris Waller earlier this week serves as a reminder that the Fed will need to see 'several' soft inflation releases to avoid tightening. That explains why, even though short-dated US rates fell 10bp yesterday, the market still prices 44bp of Fed tightening into next year. Feeding into the above story today will be the June PPI release and more testimony from Warsh.
Remember that components of PPI, such as portfolio management fees, airfares and healthcare, all feed into the Fed's preferred inflation gauge of the core PCE reading. The June reading of core PCE is released on 30 June. Thus, any unwelcome rise in any of those components today could reverse more of yesterday's move in the rates and FX markets.
Overnight also saw some soft Chinese activity data and further escalation in the Gulf. It looks like investors will struggle to price in a benign inflation environment given developments in the energy sector, where both oil and natural gas are on the rise again, while refined products like diesel are surging as Ukraine intensifies its attack on Russian refineries. While soft US CPI data has taken the sting out of the dollar's upside, it is probably too early to look for a much lower dollar just yet.
In this environment, we prefer energy-exporting, high-yield currencies, such as the Norwegian krone, where a 4%+ per annum one-week deposit rate provides reward if volatility drops again in summer markets. DXY has support at 100.50. We can see that holding while energy prices stay bid.
Chris Turner EUR: Unwelcome developments in the energy sector Along with most dollar pairs, EUR/USD very much enjoyed yesterday's soft US CPI release. Were it not for developments in the Gulf and in energy markets in general, we would be happy to call EUR/USD steadily higher from here. But European natural gas is now back to levels seen in mid-March and, as above, it is too early to trade an 'all-clear' US inflation story.
In the absence of a major improvement in energy markets, we suspect that EUR/USD will struggle to break above the 1.1460/70 area and again could move down to the 1.1360/80 area should oil prices deliver another leg higher. We do note, however, that there seems to be strong demand for EUR/USD sub 1.14. One suggestion could be a rotation into European equities as analysts raise expectations for European earnings.
That may be the case, but so far those flows have not shown up in US-listed eurozone equity ETFs, e.g., the iShares MSCI Eurozone ETF. Elsewhere, a pro-risk environment given lower prospects of Fed tightening, higher energy prices and potentially lower volatility favouring the carry trade all point to the Norwegian krone recovering some of its losses since May. We have a one-month target at 11.05 for EUR/NOK, but the move could easily extend to 10.95.
We acknowledge that a soft Norwegian inflation figure this morning has lifted EUR/NOK in early Europe, but we expect good demand for the krone on dips. Chris Turner CAD: BoC should show no rush to tightening The Bank of Canada will likely keep rates unchanged at 2.25% today, in line with consensus and pricing. However, this meeting could be a litmus test for revamped hawkish bets.
There is probably little incentive to openly push back against pricing for December (20bp of tightening), but the BoC has equally very few bases to argue for any earlier action. Canada’s June CPI may follow the US measure lower on falling petrol prices, potentially falling back below 3.0%. Most importantly, core measures remain very close to 2.0%.
The 2Q BoC business outlook survey showed an increase in inflation expectations, but responses were collected in May, before the reopening of the Strait of Hormuz. The latest re-escalation and improved jobs market picture should keep the BoC open to interest rate hikes, but expect the usual mention of USMCA-related concerns to add a dovish ingredient to the overall message. We expect few changes in the policy tone by the BoC at this meeting, leaving CAD front-end rates primarily driven by developments in the Gulf.
CAD should enjoy more short-term momentum if oil prices stay supported and the BoC doesn’t surprise on the dovish side. Still, a sustainable break below 1.40 in USD/CAD requires further dovish Fed inputs, while USMCA headlines may keep offering support to the pair. Francesco Pesole CEE: US inflation brings relief to region Today's final Polish inflation figures for June should show the full details.
Inflation surprised on the downside mainly due to food and fuel prices. Core, however, remained unchanged in our estimates at 3.1%. Official core inflation figures are due tomorrow.
Yesterday, CEE FX saw a clash between higher oil prices and risk-off sentiment due to the escalation of the US-Iran conflict on the one hand and relief coming from lower US inflation on the other hand. We could see new local lows across CEE currencies but also a strong rebound after the US inflation figures yesterday. The easing of Fed hike expectations, which may be just temporary, brings relief for CEE in our view for the coming days.
We therefore maintain our bullish view of the koruna and forint and expect the next few days to bring more gains here. EUR/CZK should also be pushed down due to the hawkish Czech National Bank story locally and we could see levels below 24.200 again soon. EUR/HUF is trickier here due to the very long positioning already, but we still see a case for going lower within the current 350-360 range in our mindset, as investors see cheap levels for forint longs.
EUR/PLN, on the other hand, does not see much reason to move down from current levels and we see 4.330-340 as an anchor for now. Frantisek Taborsky CEE FX CAD Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Chris Turner Global Head of Markets and Regional Head of Research for UK & CEE Chris is Global Head of Markets and Regional Head of Research for UK & CEE. Together with his team, he provides short and medium-term FX recommendations for ING's corporate and… Francesco Pesole FX Strategist Francesco is an FX Strategist and has been with the firm since May 2019. His main focus is on the G10 space and, in particular, on European and commodity currencies.
He began his career at Credit… Frantisek Taborsky EMEA FX & FI Strategist Frantisek is an FX & FI Strategist covering EMEA markets, having joined the bank in 2022. He provides short- and medium-term recommendations for ING's corporate and institutional client… In this article USD: Softer CPI keeps a Fed hold in play EUR: Unwelcome developments in the energy sector CAD: BoC should show no rush to tightening CEE: US inflation brings relief to region
How we cover this story
Below-expected US inflation reduces Fed rate-hike expectations, pressuring USD across G10 pairs and extending EUR/USD strength.
Energy shock undermines ECB rate differentials vs USD, exposing EUR/USD to fresh downside if growth concerns outpace rate expectations.
EUR/USD spot at 1.1421 sits 2.39% below the 28-firm median Dec-26 target of 1.17, with a 0.20 range separating the most and least bullish desks.
USD/CAD trades at 1.4070, roughly 4.2% above the 23-firm median Dec-26 target of 1.35, with a 0.15 spread separating Citi from Scotiabank.
USD/CAD trades 4.67% above the 23-firm Dec-26 consensus of 1.35, with a 0.15 dispersion range signalling unusually wide disagreement on BoC-Fed dynamics.
28 investment banks see EUR/USD at 1.1711 by Dec 2026
View the live EUR/USD forecastInvestec |
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