FX Daily: New central bank calls, unchanged EUR/USD view
The desk expects a rate hike from both the ECB and Fed in December, positioning itself for potential USD upside amid shifting oil prices. Per the full note from ing-think, while the EUR/USD target remains unchanged at 1.160 for year-end, the deterioration of the dollar's recent performance due to supply-side factors in the oil market underlines this sentiment. With our current consensus target for EUR/USD at 1.1684, the landscape appears set for traders monitoring the upcoming geopolitical discussions that may indirectly affect energy prices and, in turn, USD valuation.
What the desk is arguing
The desk maintains that the ECB and Fed are poised for rate hikes in December, contributing to USD bullish sentiment. As articulated in the commentary from ing-think, this outlook hinges on stronger economic data and elevated energy prices that may prompt the Fed to act to curb volatility.
Notably, the desk highlights the risk of a significant impact from oil market dynamics as key discussions are set between President Trump and Gulf states, further reinforcing the correlation between oil prices and currency valuations.
Where it sits in our coverage
Currently, our consensus target for EUR/USD is 1.1684, with a range spanning from 1.1200 to 1.2000. Notable targets for December 2026 from specific firms include: - socgen: 1.1400 - rbc: 1.2000 - investec: 1.1700
The desk's unchanged view on EUR/USD is closely aligned with the broader consensus but leans toward the higher end of forecasts, presenting a more bullish perspective than some firms positioned at lower targets.
How other firms see it
Several firms, such as socgen and rbc, are also predicting EUR/USD patterns that align with our view, emphasizing the underlying strength of the dollar amidst potential rate hikes. Conversely, danskebank and hsbc propose more conservative targets, assuming a weaker euro trajectory.
In conjunction with this analysis, USD/JPY remains critical to understanding the ripple effects of U.S. monetary policy adjustments and energy price fluctuations that can significantly influence market sentiment and positioning.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Expectations for simultaneous rate hikes by the ECB and Fed in December bolster USD outlook.
- 02EUR/USD target is unchanged at 1.160, reflecting steady positioning despite oil price vagaries.
- 03Consensus reflects broader bullish sentiment for USD against EUR, indicating potential volatility ahead.
- 04Upcoming geopolitical discussions could have critical implications for oil pricing and forex markets.
Market implications
Watch closely for impacts from President Trump's meetings with Gulf state representatives, as discussions could influence oil prices and subsequently drive USD valuations, particularly against EUR and JPY pairs.
Risks to this view
Any significant drop in oil prices or a dovish pivot by central banks could rapidly alter the current projections. A failure by the Fed to implement a December hike, coupled with weaker economic indicators, could also shift sentiment against the USD.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
BNP Paribas | Bearish | 1.1500 |
UBS | Bullish | 1.1800 |
UOB | Bullish | 1.1800 |
Articles FX Daily: New central bank calls, unchanged EUR/USD view Published 07:11 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download We now expect both the ECB and the Fed to hike rates in December. Here , we discuss the reasoning for our new calls and why we're keeping our EUR/USD profile unchanged, still targeting 1.160 for year-end. We expect oil to dominate as an FX driver this week, with Trump expected to meet Gulf state members and Xi Jinping.
USD/JPY risks remain on the upside Frantisek Taborsky , Francesco Pesole and Chris Turner We see mostly downside risks for EUR/USD this week USD: Big summits this week The dollar lost some ground on Friday after a reported Bank of Japan rate check (more in the JPY section below), but in our view it remains on solid footing. We recently updated our Fed call and now expect one final hike this year. December remains more likely than October, partly because of its proximity to the midterms, although stronger data and further gains in energy prices could encourage markets to add to the 13bp currently priced for next month.
If markets assign at least a two-thirds probability to a hike by decision day, the Fed may feel compelled to act, even without full conviction, to avoid unwanted volatility at the back end of the curve. The scope to keep pricing a more hawkish Fed after the September FOMC remains a key argument for further US dollar gains. While we still see near-term upside risks for the greenback, our year-end and longer-term view is unchanged and gradually USD negative.
We remain materially more dovish than market pricing on the Fed and continue to use a sharp decline in oil prices in 4Q as our baseline scenario. With little on the data calendar, oil should be the key driver for the USD this week. Investors will focus on US President Donald Trump’s meetings with Gulf state representatives, reportedly taking place in New York alongside the UN General Assembly.
Crude has softened in recent days, but the market still lacks enough encouraging news to push prices back below $100/bbl. Trump is also due to meet Chinese President Xi Jinping in Washington on Thursday. While this shouldn’t be a major market event, positive trade headlines could provide some support to the dollar.
Francesco Pesole EUR: ECB speakers still hinting hawkish Two more regional elections this weekend added fuel to Germany’s ruling Christian Democratic Union (CDU) party’s crisis. The far-right Alternative for Germany (AfD) won Mecklenburg-Vorpommern , where the CDU missed the 5% threshold to enter the State parliament, and the Left Party won Berlin. Our macro team argues here that both outcomes mostly reflect local dynamics rather than a verdict on Chancellor Friedrich Merz’s reform agenda.
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