FX Daily: US inflation to offer some support to USD today
The desk posits that today's US inflation data will provide a boost to the USD, as a slightly hotter-than-expected core CPI print is anticipated. Per the full note from ing-think, a 0.3% MoM increase could support front-end USD rates and stabilize the currency. Currently, the dollar has surrendered much of the previous week's gains, driven by a recovery in risk sentiment and falling energy prices. As traders look toward the upcoming inflation data, the outlook for USD is cautiously optimistic, particularly against the EUR, which is trading at 1.1373 as of recent reports.
What the desk is arguing
The desk believes that the upcoming US core CPI data will lend critical support to the USD, especially given a consensus forecast of 0.3% MoM growth. The commentary from ing-think highlights that the stability in front-end rates could bolster the dollar's position in an otherwise risk-friendly environment.
Current conditions show normalized risk appetite with equities rebounding despite a notable decline in Nvidia's stock. This rebound suggests that last week’s losses may have been transient, with rising equity markets stripping some support from the dollar’s recent gains against a backdrop of moderating energy prices.
Where it sits in our coverage
Our consensus target for the EUR/USD pair is currently set at 1.1425, with a range spanning from 1.1162 to 1.2000 based on firm forecasts. Notable projections include hsbc and rbc, both predicting a target of 1.1700 for December 2026.
The desk's position aligns close to the lower end of the consensus range, indicating that while support for USD is expected, it has not fully materialized across all forecasts.
How other firms see it
Several firms align with the desk's view on USD stability through a potential CPI reprieve, including scotiabank and rabobank, which recently revised their targets upward. In contrast, firms such as cibc hold a slightly more bearish outlook, with expectations surpassing figures anticipated from other institutions.
Relevant pairs to observe alongside this commentary include GBP/USD and USD/JPY, especially in light of their interactions with Fed monetary policy dynamics. Market participants should monitor these developments closely, as they may further comment on the USD's relative strength moving forward.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Anticipation of US core CPI at 0.3% MoM could support the USD.
- 02Current EUR/USD spot at 1.1373 is below the consensus of 1.1425.
- 03Risk sentiment is recovering, potentially tilting dollar strength.
- 04The FOMC's hawkish stance may remain intact barring significant downward surprises.
Market implications
Traders should keep an eye on the core CPI release today, especially at or above the 0.3% forecast. A stronger-than-expected print could lead the EUR/USD to test lower support levels, potentially heading towards the 1.1300 range in the short term.
Risks to this view
A significant downward surprise in today's inflation data could pressure the dollar lower, forcing FOMC members to adopt a more dovish tone, which might weaken the current bullish sentiment around the USD. Additionally, a further rebound in risk assets could undermine dollar strength.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
MUFG | Neutral | 1.1200 |
UniCredit | Bullish | 1.1600 |
Rabobank | Bearish | 1.1000 |
All 32 desk targets for EUR/USD
Articles FX Daily: US inflation to offer some support to USD today Published 07:50 Translate Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The dollar has handed back most of last week’s gains on the back of a rebound in risk sentiment, also helped by further declines in energy prices. But we expect a slightly hotter-than-expected 0.3% MoM US core CPI print today to offer the dollar some support. We see some stabilisation in EUR/USD for the remainder of this week Francesco Pesole , Frantisek Taborsky and Chris Turner USD: AI trade bounces back The dollar has given back most of last week’s gains as global equities rebounded and oil prices extended their decline at the start of this week.
Despite the 4% drop in Nvidia stock, led by an investigation into CEO Jensen Huang, the Nasdaq and S&P 500 are now less than 2% below their 4 November closing levels. That sends a rather strong signal that last week was a bout of jitters rather than the start of a bigger downturn. A further improvement in risk sentiment should strip the dollar of the small residual gains from the selloff.
But the macro story may incidentally work in the dollar’s favour, leaving risks for the greenback rather balanced, in our view, by the end of the week. We think today’s October core CPI will come in slightly above consensus at 0.3% MoM, offering a bit more support to front-end USD rates, which have also crawled back higher as sentiment has stabilised. We expect headline CPI at 0.3% MoM too, in line with consensus (YoY figures are not published this month due to last year’s government shutdown).
The MoM increase is consistent with the Fed meeting its inflation target of 0.17%. Barring a downward surprise today, it will therefore be hard for FOMC members to sound materially less hawkish simply on the back of the stock market troubles. Today’s long list of speakers includes Chris Waller and Michelle Bowman, considered among the most dovish voices, alongside Lorie Logan and Jeff Schmid, two of the most hawkish members.
Francesco Pesole EUR: Lower oil not enough for a rally on its own We warned yesterday that EUR/USD was looking dangerously undervalued and called for an upward correction. We saw that materialise quite rapidly yesterday, and our models now show the pair has returned to the 1.5-1.7% undervaluation that prevailed before last Thursday’s equity selloff. While still cheap, French risk continues to play a role and argues against another fast tightening in the valuation gap.
At this stage, other market drivers need to turn in favour of EUR/USD to push the pair higher. Plummeting oil prices on the back of renewed Middle East optimism may offer limited further support on their own, with moves in short-term rate differentials likely to matter more. The risk remains that a further decline in energy prices prompts a larger repricing in ECB rate expectations relative to the Fed’s, especially as we expect today’s US CPI report to build a stronger floor for front-end USD rates.
For now, we struggle to see the EUR/USD rally extending much further this week and instead expect the pair to stabilise in the 1.120-1.1250 area. We retain a moderate positive bias into year-end, largely due to positive year-end seasonality and a tentative view that some French risk could temporarily leave the euro. Our year-end target remains 1.130.
Francesco Pesole NOK: Inflation endorses prolonged pause Norway released October inflation data this morning. Headline CPI accelerated from 3.4% to 3.6%, marginally below the 3.7% consensus, while underlying inflation (CPI-ATE) slowed as expected from 3.0% to 2.7%. The still-elevated headline print points to some caution in moving away from Norges Bank's tightening bias, but CPI-ATE below 3.0% should prevent further rate increases.
Norges Bank has been one of the most reactive central banks to inflationary risk, even before the Iran conflict. With rates at 4.50%, policymakers are keeping the door open to more hikes if needed, while sending a clear signal that a prolonged pause is the baseline scenario. We agree and see further moderation in inflation in 2027 as favouring a transition to rate cuts earlier than most other central banks.
Markets are pricing around a one-in-three chance of another hike by March and 10bp of easing over the next year. The dovish reassessment on the curve, combined with the sharp decline in oil prices, has prompted a rebound in EUR/NOK. The pair is now within our 10.55-10.65 year-end target range.
Francesco Pesole CEE: Inflation is creeping up Hungarian inflation rose from 1.6% to 2.0% in October, in line with NBH and market expectations, with core inflation also rising slightly. Nevertheless, Hungarian inflation remains the lowest in the CEE region and well below the NBH’s target. Inflation is expected to continue rising in the coming months, peaking slightly below 4% in the middle of next year before returning to the target.
This should allow the NBH to continue with rate cuts in the second half of next year. As is the case elsewhere, energy prices remain the primary unknown, with Hungary remaining significantly exposed to this risk. Later today, final Czech inflation figures for October will be released.
The flash estimate last week showed a decline from 2.5% to 2.4%. The focus today is on the breakdown and core inflation, where we expect an uptick from 3.1% to 3.2%. Details of the CNB's new forecast will not be released until Friday, but the central bank will share its expectations for October in a commentary this afternoon.
Rates in the region saw another leg of a rally yesterday as the market priced out rate hikes from the curve, following a decline in energy prices. FX saw only limited gains, despite a global risk-on sentiment. Narrowing rate differentials and a persistently strong US dollar likely remain headwinds; meanwhile, the rally in rates suggests a weaker outlook for regional FX once the current stabilisation phase settles.
Frantisek Taborsky FX 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 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… 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… 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: AI trade bounces back EUR: Lower oil not enough for a rally on its own NOK: Inflation endorses prolonged pause CEE: Inflation is creeping up
Sources & References
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Cross-firm research
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