FX Daily: Dollar resilience builds
The desk maintains a bullish view on the dollar's resilience, driven predominantly by hawkish signals from the Federal Reserve amidst falling oil prices. Per the full note from ing-think, this environment suggests limited downside for USD, especially against the EUR as market participants remain anchored to Fed hike expectations. Recent labor market data supports expectations for a strong payroll print, further solidifying the dollar's strength. Our current consensus for EUR/USD sits at 1.1684, indicating a cautious outlook on eurozone monetary policy amid these developments.
What the desk is arguing
The desk argues that the dollar is likely to remain strong despite external pressures such as lower oil prices and a globally risk-on sentiment. Per the full note from ing-think, hawkish Fedspeak, particularly from Richmond Fed President Thomas Barkin, emphasizes the need for continued vigilance on inflation, aligning with the prevailing bullish sentiment for the dollar.
Barkin's comments pointed out that a single rate hike may be insufficient to curb inflation, noting resilient labor market indicators, including jobless claims below 200k and a 20k increase in initial hiring reported by ADP. This outlook implies strong Fed support for the USD, even in the face of falling oil prices that typically bolster EUR/USD.
Where it sits in our coverage
Our current consensus target for EUR/USD is 1.1684, with a range of 1.1200 to 1.2000 across various firms. Notably: - socgen: Dec-26 target at 1.1400 - investec: Dec-26 target at 1.1700 - rbc: Dec-26 target at 1.2000
The desk's view aligns with the broader consensus, which sits towards the higher end of this range, suggesting cautious optimism about the euro amid ongoing signals from the Fed.
How other firms see it
General sentiment among firms like socgen and investec aligns with our view, emphasizing potential dollar strength. In contrast, danskebank carries a more bearish outlook, with a lower target range indicating differing confidence in the eurozone's economic recovery.
The trajectory of EUR/USD remains closely linked to the ECB's rate path amidst these dynamics, while developments in USD/JPY could provide insights into market sentiment volatility.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01The dollar shows resilience despite declining oil prices and favorable risk sentiment.
- 02Hawkish Fedspeak, particularly from Richmond Fed President Barkin, underpins demand for USD.
- 03Labor market strength is expected to support strong payroll data later this month.
- 04Consensual targets for EUR/USD indicate cautious optimism towards the euro.
Market implications
Watch for EUR/USD levels around the consensus target of 1.1684, particularly as the market digests upcoming payroll data that could further influence USD strength. Continued hawkish signals from Fed officials will be crucial in shaping the dollar's trajectory in the near term.
Risks to this view
A significant shift in labor market indicators or a dovish pivot from Fed officials could undermine the current bullish outlook on the dollar. Additionally, any geopolitical developments that escalate market risk aversion could shift sentiment rapidly against the greenback.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Deutsche Bank | Neutral | 1.1668 |
BNP Paribas | Bearish | 1.1500 |
UBS | Bullish | 1.1800 |
Articles FX Daily: Dollar resilience builds Published 07:45 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The dollar has remained firm despite oil and global risk sentiment arguing for a correction. Hawkish Fedspeak remains key, and this week underscores the risk that falling oil prices may offer little support to EUR/USD, as markets may be more willing to stick with Fed hike expectations than with the ECB's in an oil price decline. USD upside risks persist Frantisek Taborsky , Francesco Pesole and Chris Turner Markets found little direction in Trump's UN address on Tuesday USD: Staying strong The dollar continues to show very good resilience to lower energy prices and a risk-friendly environment.
It’s another sign that the Fed story is dominant, and the hawkish Fedspeak is enough to keep USD in demand. Richmond Fed President Thomas Barkin, who becomes a voter in 2027, reinforced that message yesterday, arguing that a single rate hike may not be enough to bring inflation under control. He also noted that resilient labour market conditions should keep consumer spending supported, implying that a dovish shift among the hawks may require clearer signs of labour market softening.
But high-frequency jobs indicators have remained strong. Initial jobless claims are back below 200k and ADP reported a bump in weekly hiring to 20k at the start of September. Consensus is starting to build around a strong September payroll print – around 80-100k.
Geopolitics had a limited impact on FX yesterday. President Trump's UN speech generated few clear market signals, while constructive talks with Iranian delegates and the reopening of the Saudi East-West pipeline pushed Brent below $100/bbl. Whether this evolves into a more sustained decline remains to be seen.
From a rates perspective, oil floating around the $90-100/bbl range is unlikely to force a dovish rethink in market expectations. We’ll be awaiting more headlines from New York ahead of tomorrow’s Trump-Xi meeting. The Fedspeak agenda is quiet today, and the data calendar only includes S&P Global PMIs, which matter less for markets than the ISM surveys.
We retain the view that the dollar faces upside risks over the next couple of weeks, when a revamp of data releases can prompt markets to add bets on an October hike. In that context, DXY reaching 101.0 remains a very achievable near-term target. Francesco Pesole EUR: Still downside risks EUR/USD is starting to look a tad cheap, as global equities support the pair’s short-term fair value.
Still, we see little technical justification for fading the current decline before 1.140-1.142, where EUR/USD would be breaching a 1.5 standard deviation misvaluation band, assuming rate differentials remain unchanged. This week underscored another risk: when oil prices fall, markets may price out ECB tightening faster than Fed tightening. That was a major drag on EUR/USD in June, and any hint of a dovish rethink from ECB speakers could trigger a leg lower.
Sources & References
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