FX Daily: Data back in the driver’s seat this week
The desk anticipates increased volatility in the USD as crucial economic data emerges this week, potentially influencing Federal Reserve rate expectations. Per the full note, a consensus expectation of 90k non-farm payrolls could significantly impact market sentiment, particularly should it reflect any upside surprises that bolster USD rate hike pricing beyond the current 16bp. As recent movements in the AUDUSD and EURUSD indicate, the data-driven sentiment may create headwinds for a sustained dollar rally, with analysts projecting stabilization in the currency ahead of key releases, such as the August payrolls on Friday.
What the desk is arguing
The desk believes that US economic data will play a pivotal role in the dollar's trajectory this week, particularly with job figures coming in September. The note highlights that while market pricing for the October rate hike currently stands at 16bp, further labor market strength could push this expectation higher, which weighs on the dollar's recent momentum.
Recent Fedspeak, along with Brent crude prices remaining supported above $100/bbl, enhance the need for robust datapoints to solidify the dollar's current positioning. Analysts note that any significant upward revisions to the August jobs figure, which was initially reported at 162k, would exacerbate this relationship.
Where it sits in our coverage
For AUD, our current spot is 0.6886 with a consensus target of 0.7100, ranging from 0.6600 to 0.7300. Firms with relevant forecasts include: - tmgm: Dec-26 target at 0.6900 - scotiabank: Dec-26 target at 0.7500 - rbc: Dec-26 target at 0.7000
This view is broadly aligned with the consensus, with various firms coalescing around a middle ground. However, the tmgm forecast is slightly more cautious in comparison to the higher Dec-26 targets from scotiabank, indicating divergence in outlooks.
How other firms see it
Several firms align with the view of potential upside pressures on the USD in light of conflicting economic signals, including morganstanley and rbc. In contrast, socgen diverges, advocating for a potential slowdown in USD strength based on alternative data interpretations.
The dynamics in EURUSD could also be influenced by upcoming ECB considerations, particularly regarding policy shifts and easing expectations that mirror the ongoing debates surrounding US monetary policy. Maintaining a close eye on both pairs' interdependencies remains essential in this shifting landscape.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Fresh US economic data expected to drive currency movements this week.
- 02Key jobs figures may significantly influence rate hike pricing for October Federal Reserve meeting.
- 03Expectations for USD to stabilize, particularly against AUD and EUR pairs.
- 04Watch for August payroll revisions that could upset current dollar momentum.
Market implications
Traders should monitor the October rate hike pricing, particularly any movements above 20bp driven by strong labor data. Additionally, August payroll figures on Friday will serve as a critical benchmark for USD strength against both AUD and EUR.
Risks to this view
A significant miss on the September jobs data, especially if revisions to August payrolls are downward, would invalidate the current bullish performance outlook for the dollar. Moreover, developments regarding oil prices and geopolitical factors, such as US-Iran negotiations impacting supply, could also alter projections.
AUD/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
J.P. Morgan | Bullish | 0.6800 |
Crédit Agricole | Bullish | 0.7300 |
Goldman Sachs | Bullish | 0.7000 |
All 22 desk targets for AUD/USD
Articles FX Daily: Data back in the driver’s seat this week Published 07:22 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Markets will look for fresh evidence of a hot US economy from this week as September figures start to flow in. Upside surprises in jobs data could take rate hike pricing for the October FOMC above 20bp. It’s not our baseline though, and we expect some stabilisation with modest downside risks for USD in the coming days.
We expect a hawkish hike by the RBA tomorrow Frantisek Taborsky , Francesco Pesole and Chris Turner After its recent strong momentum, we see downside risks for the dollar in the next few days USD: Some tiredness in the rally? Data could re-emerge as a primary driver for the dollar this week. After a good dose of hawkish Fedspeak and Brent staying supported above $100/bbl, markets now need fresh evidence of US economic strength to solidify expectations of a 28 October rate hike.
Pricing is currently 16bp, and peaked at 19bp last week. The August CPI report on 14 October will be the most important release, but Friday’s jobs figures have the potential to take October rate hike pricing above 20bp. We expect a consensus 90k for September payrolls, but see risks of downward revisions to August’s blowout 162k print.
Overall, we expect this week’s labour market data, including ADP and JOLTS, to leave markets guessing about an October hike while keeping the implied probability above 50%. August PCE, released on Wednesday, is the other key highlight of the week, although it should have a more limited impact than the jobs figures. Barring another significant upside surprise in payrolls, we don’t see the dollar keeping up with its recent strong momentum.
While it might be too early for a break lower in oil prices, news of the US and Iran working on a deal regarding the Strait of Hormuz could prevent another jump higher. That can ultimately stabilise bonds and risk sentiment. The dollar has been looking a bit expensive across G10 according to our short-term valuation models, and we see risks as balanced for USD this week.
Dollar bulls may be content with DXY holding around 101.0 for now, but risks are of a pullback to 100.50, more coherent with fundamentals. Francesco Pesole EUR: Inflation week Our models still suggest EUR/USD should be trading above 1.140. Clearly, the latest moves in bond markets, equities and oil all suggest against aggressively bucking the dollar uptrend.
But we feel this week could bring some stabilisation after a decline that looks a bit overdone. The highlight of the week in the eurozone is inflation data for September. Country releases start tomorrow with Spain, and eurozone-wide numbers are due Friday.
Headline CPI should accelerate on energy prices, but we expect core inflation to inch only 0.1ppt higher to 2.5%, confirming there’s no sign of second-round effects. Still, we doubt that will be enough to drive the European Central Bank to a more dovish stance. Policymakers still seem to prefer keeping market pricing hawkish as long as energy prices remain elevated.
The closer we get to the October meeting, the more impactful ECB speakers can be on markets. With data not exactly screaming for another hike just yet, pricing relies significantly on short-term guidance. Today, we’ll hear from President Christine Lagarde, and from many other ECB officials during the week.
We have a preference for EUR/USD to inch back higher and stabilise just above 1.140, but we aren’t blind to the lingering downside risks. Among those are French bonds, where another round of spread widening can start to become noticeable in FX. Francesco Pesole AUD: Hawkish hike by RBA The Reserve Bank of Australia announces its policy decision at 05:30am BST tomorrow, and we expect a 25bp rate hike to 4.60% (full preview here ).
Markets are fully pricing in the move, and consensus is unanimously calling for it. That means the Australian dollar's reaction will be heavily dependent on whether Governor Michele Bullock will leave the door open for more hikes. We think she will.
That’s because inflation concerns remain elevated, and even if crude prices decline, domestic fuel prices are set to remain sticky for longer. Core CPI measures have all remained hot, the labour market is tight, and growth has proven stronger than expected. We therefore expect markets to retain expectations for further tightening after the meeting, offering support to AUD.
We still expect AUD/USD to return to 0.720 by year-end. Francesco Pesole CEE: Global headwinds keep currencies on the back foot After trading closed on Friday, S&P revised the outlook on the Czech Republic's AA- rating from stable to positive. Given current market conditions, we expect the market impact to be limited.
Over the weekend, Czech and Hungarian central bankers also spoke. Czech National Bank Deputy Governor Eva Zamrazilova reiterated that the November decision would be between keeping rates unchanged and raising them. National Bank of Hungary Deputy Governor Zoltan Kurali said a credible fiscal path, due to be presented shortly by the government, should lower the country’s risk premium and support rating upgrades, creating a “different environment”.
As the month draws to a close, the CEE calendar is relatively light. Hungary's Government Debt Management Agency is expected to update its funding strategy today. On Wednesday, Hungary will release PPI data, the Czech Republic its final GDP figures, and Poland its key September inflation reading.
We expect Polish inflation to rise from 3.4% to 4.2%, mainly due to higher fuel prices, while inflation excluding fuel remains subdued and core inflation edges up to 3.4%. CEE PMI data will follow on Thursday. The global backdrop remains the main driver and, as last week, risks are tilted against CEE currencies.
A stronger US dollar, higher fuel prices, and rising core rates are regional headwinds, although a sell-off in local rates should limit FX depreciation. Overall, we remain bearish and expect the zloty to underperform its CEE peers, reflecting the region’s highest inflation and a dovish central bank. Frantisek Taborsky US Monetary Policy GDP FX Eurozone Emerging markets ECB 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 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… 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… 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… In this article USD: Some tiredness in the rally?
EUR: Inflation week AUD: Hawkish hike by RBA CEE: Global headwinds keep currencies on the back foot
Sources & References
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