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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 37 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 37 institutional desks. No promotion.
The ECB's forthcoming rate decision is anticipated to yield only a 25bp hike, with insufficient signals for further tightening, which sets a high bar for hawkish sentiment and exposes the EUR/USD to downside risks. Per the full note, the market's aggressive pricing does not align with the ECB's likely cautious stance, especially as the dollar finds some support. Often viewed as a driver, the smaller-than-expected Treasury buyback of $6bn may alter positioning on the EUR/USD, adding to short-term volatility ahead of critical inflation data. The consensus target for EUR/USD remains at 1.1700 through Dec-26 with significant divergence across firms and underlies the precarious positioning within the currency market as traders await the U.S. PPI release.
The desk emphasizes that the ECB is likely to deliver a 25bp interest rate hike without a strong commitment to further tightening, which creates downward pressure on the EUR/USD. The market currently anticipates a more aggressive ECB than what is projected, as noted in last day’s report, exposing the pair to potential weakness amidst broader dollar strength.
The reaction in the bond markets following the U.S. Treasury buyback announcement indicates a divergence between actual support and expectations. As the market had anticipated larger buybacks—rumored to be around $10bn—the dollar's later rebound suggests that there may be some unwinding of risk premium attached to earlier Treasury interventions.
The current consensus target for EUR/USD is 1.1700 with a range from 1.1200 to 1.2000. Key firms include morganstanley with a Dec-26 target of 1.2150, rbc at 1.2000, and anz projecting 1.1400.
This stance reveals that the desk's forecast is closely aligned with the lower end of the consensus spread, where expectations reflect a more cautious view of the ECB's capacity to tighten further. The market seems to be positioned for potential downside as we scrutinize the factors contributing to the ECB's decision-making process.
Several firms are aligned with this cautious view regarding the ECB, including scotiabank and mizuho, who anticipate EUR weakness given the high bar for further hawkish action. In contrast, firms like goldman and rabobank maintain more bullish forecasts of 1.2000 and 1.1800 respectively, highlighting a more optimistic outlook for the euro against the U.S. dollar.
Monitoring GBP/USD could provide deeper insights into potential spillovers from a weaker euro tied to ECB expectations, especially considering imminent inflation data that may impact overall dollar sentiment.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should keep an eye on the EUR/USD level around 1.1446, as further short-selling could ensue if the ECB fails to deliver a hawkish narrative. Additionally, the U.S. PPI inflation release on the horizon may drive immediate volatility as traders recalibrate rates expectations around the FOMC meeting next week.
Risks to this view
A higher-than-expected U.S. PPI number may reinforce bullish sentiment for the dollar, pushing the EUR/USD lower. Conversely, if the ECB surprises with a more robust hawkish outlook, it could bolster the euro, compelling a reevaluation of current short positions.
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bullish | 1.1800 |
Société Générale | Bearish | 1.1400 |
Scotiabank | Bullish | 1.1700 |
All 30 desk targets for EUR/USD
Articles FX Daily: The hawkish bar is set high for the ECB Published 07:45 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download As the ECB delivers its well-telegraphed 25bp hike, we doubt it will signal enough commitment to further tightening to validate the market’s aggressively hawkish pricing. That leaves EUR/USD exposed to downside risks, particularly as the dollar may find additional support after yesterday’s smaller-than-expected Treasury buyback announcement Frantisek Taborsky , Francesco Pesole and Chris Turner Treasury Secretary Scott Bessent announced that the US would buy back $6bn worth of government debt – but market expectations were clearly of a higher figure USD: Some Bessent risk premium leaving the dollar? Poor price action for the dollar persisted for most of yesterday.
Then came the US Treasury announcement that it would buy back $6bn in long-term bonds, triple the amount announced in August. The bond market’s negative reaction signals that expectations were clearly of a higher figure – somewhere around $10bn had been rumoured. However, that prompted a dollar rebound, as some risk premium linked to outsized Treasury intervention was unwound.
The currency market is unlikely to shelve the debasement narrative just yet. But yesterday’s announcement could help create a better environment for the dollar, potentially allowing it to respond more efficiently to external drivers such as higher oil prices and weaker equities, both USD positives. Today, focus will be on US PPI inflation for August, which should have a higher-than-usual market impact ahead of tomorrow’s CPI and next week’s FOMC.
Consensus is for 0.4% MoM headline PPI, and 0.3% for core. We feel these are figures that can – if anything – slightly reinforce market conviction on a September hike: pricing is currently 16bp. We continue to see upside risks for the dollar.
If front-end USD rates remain around current levels and global sentiment stays fragile, we cannot see a fundamental reason for persistent USD underperformance. Unless inflation delivers material downside surprises today or tomorrow, the conditions appear in place for DXY to return to 99.0. Francesco Pesole EUR: ECB can disappoint the hawks EUR/USD climbed to 1.650 yesterday before reversing after the US Treasury announcement.
The initial rally was driven by a sizeable 7-8bp tightening in EUR/USD two-year swap differentials, entirely the result of an almost 10bp rise in the euro leg. That likely reflected spillover from another rise in energy prices and perhaps some positioning for a hawkish ECB message today. On the latter, we aren’t convinced.
As discussed in our ECB cheat sheet , there are some downside risks for the euro today. Markets now price 50bp of tightening by year-end and 85bp by July, leaving the ECB with a high bar to meet. While today’s widely expected 25bp hike can still be framed as an insurance move, further hikes would push policy further into restrictive territory.
We doubt the ECB is ready to semi-commit to another hike by year-end, as it did in July, for two main reasons: a) the inflation projections are unlikely to justify it; b) concerns may be building around the eurozone bond market. To be clear, we don’t think the ECB will be intentionally dovish. But retaining broad optionality on further tightening seems too little to satisfy markets’ hawkish bets.
We expect some repricing lower in the EUR curve to pave the way for a retest of 1.160 ahead of next week’s FOMC (where we expect a hike). Our one-month target remains 1.150. Francesco Pesole CEE: Central banks leave room for weaker zloty and koruna As expected, the National Bank of Poland kept rates unchanged at 3.75% yesterday.
The statement offered little new guidance, leaving attention on Governor Adam Glapinski’s press conference today at 3pm local time. We expect a somewhat more hawkish tone than in July, reflecting higher inflation and a firmer outlook. However, with markets pricing in around 85bp of tightening, the bar for a hawkish surprise is high.
We therefore see scope for some easing in rate expectations and a rise in EUR/PLN, also supported by record gas prices, potentially taking the pair back above 4.320. In the Czech Republic, the CNB blackout period begins today. Deputy Governor Eva Zamrazilova, one of the board’s most hawkish members, said yesterday that she favours keeping rates unchanged at next week’s September meeting, strongly signalling the likely outcome for the broader board.
The CNB could still communicate today, but surprises appear unlikely. Despite the ongoing rates sell-off, the interest-rate differential has narrowed and, in line with our Monday call, EUR/CZK has moved back above 24.250. The pair is currently consistent with the rates move in our models, although a more dovish CNB decision than markets expect next week could push it higher.
Frantisek Taborsky TRY: Rates on hold but cuts ahead We expect the CBT to keep rates unchanged at 37% today. It is too early to resume easing after the bank restarted weekly repo auctions and brought the effective funding rate down from 40% to the policy rate. Still, weaker-than-expected 2Q GDP and a continued gradual decline in inflation should allow two 100bp cuts to 35% in Q4.
As liquidity conditions have normalised, market pricing has turned more dovish and moved closer to our year-end forecast. The CBT rate is now priced at 34.50% by year-end. However, markets remain sceptical about the scope for easing next year, pricing only around 100bp of cuts.
Continued disinflation could drive further dovish repricing in this part of the curve. The FX outlook is broadly unchanged. Long TRY positioning has already returned to pre-US-Iran conflict levels, despite the CBT’s dovish August stance and the prospect of renewed easing.
At the same time, the continued recovery in central bank FX reserves should support investor demand for the TRY carry trade. We forecast USD/TRY at 52 by year-end and 63 by the end of next year. Frantisek Taborsky TRY FX Federal Reserve Eurozone Emerging markets 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 Bessent risk premium leaving the dollar?
EUR: ECB can disappoint the hawks CEE: Central banks leave room for weaker zloty and koruna TRY: Rates on hold but cuts ahead
How we cover this story
EUR/USD 1.1585 support breach would signal resumption of downtrend; monitor for break below key technical level.
GBP/USD trades at 1.3526, 0.54% below the 20-firm Dec-26 consensus of 1.36, with a 0.26-point dispersion that frames sharply divergent BoE reaction scenarios.
EUR/USD spot sits 0.82% below the 30-firm median Dec-26 target of 1.17, with a 0.14-handle dispersion pointing to unresolved macro disagreement.
USD/JPY trades 1.28% above the 23-firm median Dec-26 target of 152.0, with a 25.5-point dispersion that reflects sharply divided BoJ and US rate-path assumptions.
30 investment banks see EUR/USD at 1.1659 by Dec 2026
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