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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 39 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 39 institutional desks. No promotion.
The desk reinforces the bullish sentiment on the dollar as the DXY dollar index approaches 101.80, bolstered by resilient US economic activity that continues to support Fed hawkishness. Per the full note from ing-think, recent softer-than-expected inflation data hasn't significantly altered market expectations for further rate hikes, as evidenced by a quick retracement in short-dated interest rates following the data release. With the upcoming US nonfarm payrolls and other key economic data, the backdrop remains constructive for dollar strength, particularly against the backdrop of weakening performance in EUR/USD.
The desk posits that strong US economic fundamentals are continuing to drive dollar strength, with the DXY index nearing yearly highs. As noted in the source commentary, the Fed's tightening expectations remain firmly anchored despite recent inflation prints, suggesting an ongoing commitment to high interest rates.
Consumer spending reports, alongside positive signals from the ADP payroll growth data, reinforce the view that the Fed may need to explore additional tightening in the near term. This emerging strength contrasts sharply with the vulnerabilities observed in EUR/USD, which is testing lows and remains exposed to further declines.
Our consensus target for EUR/USD stands at 1.1700, with a range from 1.1200 to 1.2000. Notably, firms such as socgen and credit suisse have set Dec-26 targets reflecting a bearish outlook for the euro, specifically at 1.1400 and 1.1700 respectively.
The desk's evaluation suggests a more bearish stance on EUR/USD compared to the broader consensus, falling towards the lower end of the prevailing projections. Observations from research articles point towards an anticipated divergence, where the fed's monetary stance appears stronger relative to ECB policies.
Generally, firms like bofa and nomura align towards a bearish perspective on the USD/EUR spectrum, projecting lower targets for the euro across their forecasts. Counter to this, rbc and anz exhibit more optimistic targets for the euro, believing in potential upward movement relative to the current dollar strength.
This outlook emphasizes the interplay between US economic metrics and the stance taken by the European Central Bank, highlighting that shifts here could significantly impact the trajectory of EUR/USD. The focus remains on key economic indicators that can either fortify the dollar's momentum or challenge its ascent.
While no imminent high-impact events are slated, all eyes remain on the upcoming nonfarm payroll release. This crucial data point is likely to shape expectations around Fed policy and could steer market movements, particularly concerning EUR/USD dynamics in light of this dollar strength narrative.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should closely monitor levels around 1.14 for EUR/USD as a potential breach could amplify dollar momentum. The impending nonfarm payroll release will act as a significant indicator; strong results may reinforce the bullish dollar stance, while weaker numbers could prompt reconsideration of recent dollar strength.
Risks to this view
A shift in sentiment towards softer US economic data, or unexpected dovish guidance from the Fed speakers, could destabilize the current bullish outlook for the dollar. Additionally, any significant negative surprises in upcoming initial claims or ISM manufacturing data could challenge the strength of the dollar.
| Firm | Stance | YE 2026 |
|---|---|---|
UBS | Bullish | 1.1600 |
Scotiabank | Bearish | 1.0900 |
MUFG | Neutral | 1.1200 |
All 32 desk targets for EUR/USD
Articles FX Daily: Dollar is on a roll Published 07:40 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The dollar remains very well bid and the DXY dollar index is close to the highs of the year. Yesterday's softer-than-expected August US PCE inflation data barely put a dent in Fed tightening expectations, perhaps because US activity data continues to come in on the encouraging side. EUR/USD is testing the lows of the year and looks vulnerable Chris Turner , Frantisek Taborsky and Francesco Pesole The dollar is testing the highs of the year and could go higher USD: Activity data backs up the Fed's hawkish position The DXY dollar index is testing the highs of the year at 101.80.
Dollar debasement fears have been set aside for now as the cyclical story takes centre stage. Here the US economy is performing reasonably well and the market prices the need for the Fed to take policy into restrictive territory. Even a seemingly more docile US PCE inflation print for August , released yesterday, did not depress short-dated US interest rates for long.
For example, the one-month USD OIS rate priced one year forward briefly came off 5bp on the data release, but had retraced the entirety of that dip by the end of the US session. Firming up the view that the Fed will need to tighten again has been the activity side, where consumer spending data is holding up and there are even signs that payroll growth is accelerating again – this from the monthly ADP report released yesterday. All eyes will once again be on tomorrow's September nonfarm payrolls release.
Today, the US focus will be on the weekly initial claims data and the ISM manufacturing data. The sense is that the AI investment boom is seeping into broader parts of the US economy and a healthy 55 headline reading is expected for the index, alongside firm prices paid, new orders and employment figures. Also on the calendar are a raft of Fed speakers.
The only Fed voters speaking today are Neel Kashkari (1330CET) and Chris Waller (1600CET). Kashkari is now a noted hawk, but Waller's remarks should be more interesting should he stray away from today's subject of Fed economic data and into the realms of monetary policy. Barring some breakthrough in US-Iran negotiations, it looks like the dollar will stay bid in October.
For reference, DXY has appreciated in seven of the last 10 Octobers. Expect DXY to remain bid in a 101.50-101.80 range today, but an upside breakout is a possibility should tomorrow's US data surprise on the upside or should the sell-off in European government debt start to heavily weigh on the euro (see below). Chris Turner GBP: The Burnham bounce?
EUR/GBP has come noticeably lower this week. One could argue that independent euro weakness is starting to emerge here given that the usual hedge for eurozone political/budgetary risk, EUR/CHF, is being heavily driven by the rate spread story. But at the same time, we have heard a powerful speech from UK Prime Minister Andy Burnham in which he said he wants to formally start a debate on whether the UK should be moving much closer to Europe – including potentially pushing to rejoin the EU after the next election (due by 2029 at the latest).
Whether a Labour win in that election would be enough or a separate referendum to rejoin would be required remains to be seen. Any move by the UK to rejoin the EU would likely be seen as a positive by the foreign exchange market, having witnessed sterling's crash following the Brexit vote in 2016. Obviously, we are years away from any clarity here, but let's see whether sterling catches a bid into a supposed UK-EU summit due around 20 November.
Chris Turner EUR: French debt sell-off must be a concern As yet, it is hard to identify that the sell-off in French debt is being priced into the euro. EUR/USD has been driven to the lows of the year by the hawkish reassessment of Fed policy rather than any independent euro weakness. But the French OAT-German Bund spread widening so quickly to +127bp is quite an alarming move – potentially adding some risk premium into the euro as well as constraining the ECB's tightening cycle.
That OAT-Bund spread will be in focus today now that the French government has presented its plan to save EUR54bn and target a budget deficit at 5.0% of GDP next year. Have a look at a useful piece on this subject here. On the subject of the ECB, we hear from Joachim Nagel, Christine Lagarde and Isabel Schnabel among others today.
Expect them to hold the hawkish line for the time being, but the chances of the ECB 'out-hawking' the Fed seem slim at this stage. 1.1300/1320 may feel like the bottom of the range in EUR/USD. But if the OAT-Bund spread widens much further and US data stays strong, we will have to prepare for a drop into the 1.11-12 area. Chris Turner CEE: Inflation clues and Romania’s market test Poland’s September inflation rose from 3.4% to 4.0% yesterday, in line with expectations.
The details offer two key takeaways: we estimate that core inflation eased from 3.3% to 3.0-3.1%, while food prices stabilised after five months of decline. Softer core inflation gives the National Bank of Poland room to wait, supporting our economists’ view that the first rate hike will come only early next year. Still, November will be pivotal, as the central bank’s new forecasts could open the first window for a hike.
The stabilisation in food prices also offers a signal for next week’s inflation releases in the Czech Republic and Hungary, where food prices, as in Poland, have kept inflation lower this year. Today, we are watching PMI data across CEE, which have shown relatively resilient industrial sentiment since the US-Iran conflict began. In Romania, another attempt to form a government failed yesterday, after which the president said he would select the next candidate on 5 October.
Despite no clear path to a new government, markets remain stable. EUR/RON slipped from 5.280 towards 5.270 yesterday as part of a broader global relief rally. The key test, however, will be S&P’s sovereign rating review on Friday.
Frantisek Taborsky FX 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… 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… In this article USD: Activity data backs up the Fed's hawkish position GBP: The Burnham bounce? EUR: French debt sell-off must be a concern CEE: Inflation clues and Romania’s market test
How we cover this story
Fed hawkishness on inflation risks re-anchoring USD demand; EUR/USD 1.10 level breach signals momentum toward 2025 lows without fresh ECB stimulus signals.
Rising UST yields and hawkish Fed expectations are driving USD strength while Eurozone data deterioration leaves EUR without countervailing support.
US political gridlock reduces dollar-weakness risk from unilateral easing, while French election uncertainty and eurozone debt concerns create EUR/USD headwinds.
EUR/USD breaking below 1.1050 support with US PPI data looming signals potential for fresh downside if inflation print exceeds expectations.
EUR/USD trades 3.32% below the 32-firm median Dec-26 target of 1.14, with a 0.135 dispersion range signalling deep disagreement on the path ahead.
EUR/USD spot sits 3.32% below the 32-firm median Dec-26 target of 1.14, with a 0.135 dispersion range signalling deep disagreement on the path.
EUR/USD spot sits 3.08% below the 32-firm median Dec-26 target of 1.14, with a 0.135 dispersion range signalling deep disagreement on the path ahead.
32 investment banks see EUR/USD at 1.1455 by Dec 2026
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