FX Daily: The won also rises
Lead — The commentary indicates a steady recovery in the Korean won, buoyed by domestic growth factors and structural improvements. Per the full note source, this shift comes amidst a broader calm in FX markets, in stark contrast to rising energy prices. Market anticipation is building ahead of tonight's FOMC minutes, which may clarify the Federal Reserve's direction, particularly as it relates to the short-term outlook on rates and the dollar. Current positioning appears to favor carry trades as volatility remains subdued.
What the desk is arguing
The desk suggests that the ongoing recovery in the Korean won reflects underlying economic resilience and specific domestic growth catalysts rather than merely a technical rebound. Per the full note source, the market moods surrounding FX remain steady, with traders eyeing potential insights from the upcoming FOMC minutes.
The assertion hangs on recent trends in yield movements and ongoing demand for 10- and 30-year U.S. Treasuries, which suggest that while higher yields have dampened some enthusiasm for growth stocks, it remains to be seen how much further these dynamics will lean into the FX space. Specifically, the performance metrics of the Philadelphia Semiconductor index are showing minor dips, pointing to market consolidation and potential FX stability in the immediate term.
Where it sits in our coverage
For EUR/USD, our current consensus target is 1.1600, with a range between 1.1200 and 1.2000. Notably, key forecasts include ing with a target of 1.1700 and morganstanley at 1.2000 for March 2026.
This view generally aligns with the broader market consensus, particularly as expectations converge around the Federal Reserve's cautious approach to policy normalization. The call sits within the higher end of the target spectrum, suggesting further upside may be limited unless convincing data emerges.
How other firms see it
A number of firms are currently aligned with this more optimistic stance on the won, with anz and deutschebank both forecasting moderate upside over the coming months. Conversely, firms like bofa and scotiabank show less confidence in the won's trajectory, reflecting a divergence in outlook.
The dynamics observed in USD/JPY also come into play, as the trajectory of the pair could mirror shifts expected from U.S. monetary policy adjustments influenced by the Federal Reserve's reports alongside the won's performance. Such interconnectedness highlights the broader FX landscape where movements may impact sentiment toward multiple currencies.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01The Korean won's strong performance illustrates effective domestic economic strategies.
- 02Calm in the FX market ahead of significant FOMC minutes suggests a cautionary approach.
- 03Rising energy prices and tech stock fluctuations remain critical for market sentiment.
- 04The current data prints favor carry trades amid ongoing low volatility.
Market implications
Given the proximity to FOMC minutes release, traders should monitor for any signs of changes in Fed hawkishness that could reshape the dollar's stance. Additionally, consolidation around the current levels in major pairs could signal readiness for tactical plays on the won and against the USD/JPY as economic narratives unfold.
Risks to this view
Key risks that could invalidate this call include an unexpected shift in the FOMC's tone that strongly favors rate hikes, or a substantial deterioration in growth metrics from key sectors like semiconductors which may lead to volatility across FX pairs.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Goldman Sachs | Bearish | 1.1200 |
UOB | Neutral | 1.1590 |
Société Générale | Bearish | 1.1400 |
Articles FX Daily: The won also rises Published 06:35 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download FX markets remain calm despite energy prices nudging higher and some weakness in semiconductor stocks. Expect further consolidation ahead of tonight's release of the July FOMC meeting minutes. Elsewhere, this quarter's turnaround in the Korean won continues – a testament to the benefits of domestic growth and some structural measures Chris Turner , Francesco Pesole and Frantisek Taborsky The Korean won's recovery continues, helped by the domestic growth story USD: Waiting on the minutes The unresolved conflict in the Middle East is keeping energy prices bid and partially contributing to the rise in long-end yields.
Longer-dated US Treasuries actually found a little demand on yields above 5.30% yesterday, but risks still look skewed to the upside here. Please see the latest update from the ING Rates team here . Higher rates have taken a little steam out of the growth stocks, but a 5% drop in the Philadelphia Semiconductor index yesterday looks small beer in comparison to daily swings seen so far this year.
As yet, we see no grounds for a fundamental shift in the low volatility environment which favours the carry trade. For today, the focus will be on tonight's release of the FOMC minutes for the July meeting. Recall that the vote was 9-3 for unchanged rates and the event proved a dovish one for the short end of the US curve and the dollar, while the long end sold off.
The suspicion is that the 12-member FOMC is less hawkish than the participants whose projections delivered forecasts of a 9:9 split for a hike in the June set of Dot Plots. So while there may be a few hawkish references in tonight's minutes that could nudge the dollar and short-dated rates a little firmer, we do not see the minutes as a game changer. Instead, another batch of CPI and jobs data, plus the end-of-month Jackson Hole symposium, will have a bigger say in whether the Federal Reserve hikes in September.
Our base case is that it does not, and the dollar softens a little. Expect more narrow range trading in DXY – perhaps in a 99.40-99.80 range. One-day FX option straddles in USD/JPY price just a 28 USD pip range for the next 24 hours.
Chris Turner EUR: Natural gas prices inch higher European natural gas prices are now inching up towards their highs of the year. This is bad news for Europe and leaves manufacturers at a comparative disadvantage relative to the US. High energy prices also maintain the hawkish undercurrent at the European Central Bank, where Chief Economist Philip Lane yesterday warned of eurozone inflation staying at 3.0% all year and perhaps staying high next year as well, on the El Niño weather event driving food inflation globally.
Sources & References
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