FX Daily: FOMC minutes can reinforce dollar floor
The desk views the upcoming release of the FOMC minutes as a significant catalyst for reinforcing the dollar's bullish momentum, particularly in a context where geopolitical risks such as US-Iran tensions are not garnering strong market attention. Per the full note, the FOMC minutes are expected to emphasize a hawkish stance by the Federal Reserve, which should provide support for the dollar across key pairs like EUR/USD and GBP/USD. Given that current market positioning reflects a strong belief in further tightening, a hawkish signal will likely consolidate this outlook. This aligns with wider consensus forecasts pointing to a firmer dollar, even as the current spot rates for major pairs remain below long-term targets.
What the desk is arguing
The desk posits that the FOMC minutes to be released today will solidify a bullish floor for the dollar, likely aiding its performance against key currencies. Per the full note, market perceptions of USD strength are anchored by a recent hawkish pivot from the Fed, underscored by statements regarding inflation control and projected rate hikes. The Dot Plot’s median expectations already signal a hike, providing a foundational belief that a dovish surprise is unlikely.
The commentary suggests that limited risk of dovish sentiment coming from the minutes has positioned traders to anticipate a reinforcement of the dollar's value, especially in light of macro trends overpowering current geopolitical noise. Yesterday's market behavior saw the dollar gaining strength against risk-off sentiments, with minor movements in oil prices further supporting this narrative.
Where it sits in our coverage
The current consensus target for EUR/USD stands at 1.1900, with a range spanning from 1.1200 to 1.2000 through to December 2026. Notably, several firms project above-average gains for the dollar, such as deutschebank (1.2500), morganstanley (1.2300), and bofa (1.2200).
This view is slightly above the median consensus, where firms like cibc and ing place their December 2026 targets at 1.2200 and 1.2000, respectively. As such, the desk’s stance aligns closely with the bullish sentiment prevalent among tracking agencies while remaining cautious about approaching the upper range of forecasts in current conditions.
How other firms see it
A collection of firms shares the bullish outlook on the dollar, including morganstanley, deutschebank, and ing, all projecting steady gains across major USD pairs through the upcoming quarters. On the contrary, citi and bofa appear more reserved, forecasting weaker dollar performance against key currencies like EUR/USD, and projecting targets that reflect a slower recovery.
The looming FOMC minutes and their impact on market sentiment regarding the Federal Reserve’s rate path will be critical, especially for related pairs such as USD/JPY and GBP/USD, where monetary policy diverges significantly.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01FOMC minutes are set to reinforce the hawkish outlook for the dollar.
- 02Current geopolitical tensions are muted, allowing macro fundamentals to steer market sentiment.
- 03Consensus forecasts indicate firm support for the USD against major currencies.
- 04Trader positioning suggests a strong belief in further tightening from the Fed.
Market implications
Market participants should closely watch the reaction to the FOMC minutes and the potential for a re-evaluation of rate hike probabilities. A break above USD levels, coupled with continued support from equity market volatility, may signal increased strength of the dollar.
Risks to this view
Key risks to this bullish outlook include any unexpected dovish signals from the FOMC minutes that could lead to a reassessment of rate hike expectations. Additionally, a rapid escalation in geopolitical tensions could shift focus and drive risk-off behavior, adversely affecting the dollar's safe-haven status.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | — | 1.1445 |
MUFG | — | 1.1800 |
HSBC | — | 1.1050 |
Articles FX Daily: FOMC minutes can reinforce dollar floor 07:53 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Markets aren’t taking the re-escalation in US-Iran tensions too seriously for now, and there is a good chance focus will stay primarily on macro today, as the Fed releases its June meeting’s minutes. We expect them to reinforce the hawkish message and keep USD broadly supported. Elsewhere, the RBNZ hiked rates and signalled that more tightening is coming Francesco Pesole , Frantisek Taborsky and Chris Turner Equity jitters offered the dollar some support yesterday USD: FOMC minutes to strengthen hawkish message Equity jitters offered the dollar some support yesterday – a reminder of the greenback’s very strong safe-haven appeal despite the concentration of AI-sensitive stocks in US indices.
Oil prices are also trading on the strong side after some overnight military action in Iran and the Treasury revoking the waiver that allowed Teheran to sell crude. Markets will keep monitoring the situation but have tended to fade Middle East re-escalation risk, so there’s a good chance it will be mostly macro news driving FX today, as the June FOMC minutes are released. The importance of the Fed's hawkish shift in June for the dollar cannot be overstated.
Markets’ conviction around tightening is what prevented the dollar from following oil prices lower, and that conviction relies heavily on the median Dot Plot signalling a hike and Kevin Warsh reaffirming a strong commitment to the inflation mandate. Today’s minutes will clarify how serious members are about the possibility of rate hikes. Based on post-meeting communication, we see limited risk of a dovish surprise in the minutes.
We expect a cementing of the hawkish message to firm up dollar momentum, although we don’t expect it to lead to a break higher as markets may be reluctant to reprice rate expectations aggressively higher (now 35bp by December) after the soft jobs report. We expect mostly rangebound DXY in the very near term, with some upside risks to 101.50-102.0 unless large JPY interventions cause a mechanical correction. On a separate note, we’ve published a preview of the summer edition of the US Treasury FX report .
We expect no currency manipulator designations, as in our calculations no country breached all three quantitative criteria – despite the dollar’s decline in 2025. Francesco Pesole EUR: Still quite relaxed about France Marine Le Pen announced she will run in the 2027 presidential election after a court decision yesterday. We discuss the outlook for French politics, rates and FX in this note .
This court decision doesn’t change much for the euro considering markets are likely to be already pricing in an RN win in April. Surely, there are risks that during the campaign OATs will experience pockets of stress around fiscal concerns, spilling over into the euro. But our baseline assumption is that RN will be careful not to unnerve the bond market before the vote, so we aren’t embedding any political premium in our EUR forecasts for the moment.
Sources & References
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