ING Monthly: Weathering the shocks
Lead — The desk views the recent adjustments made by ING as indicative of a stronger dollar outlook, extending the bullish sentiment for USD/JPY and a shift in EUR/USD forecasts. Per the full note from ING, revisions include a hawkish Fed outlook driving an increase in year-end USD/JPY targets to 160 from 158, while EUR/USD targets have been reduced to 1.16 from 1.18. This recalibration reflects the Fed's probable rotation towards a more aggressive monetary stance despite slower job creation and inflation dynamics. With the current spot at 1.1446 for EUR/USD and 161.2860 for USD/JPY, traders should remain alert to market response as these forecasts diverge from general market sentiment.
What the desk is arguing
The desk interprets ING's monthly report as a clear signal of dollar strength against major currencies, particularly EUR/USD and USD/JPY. According to the research, the robust dollar outlook aligns with market expectations for continued Fed rate hikes, with a potential September elevation on the table. This is underscored by the revised year-end projection for USD/JPY, which marks a notable pivot from previous forecasts.
Additionally, maintaining that the U.S. economy has shown resilience amid external shocks emphasizes the ongoing divergence between monetary policies in the U.S. and Eurozone. This is evidenced by the more hawkish Fed compared to a tightening cycle that might culminate in the last hike for the European Central Bank, as outlined in the commentary.
Where it sits in our coverage
Our internal target for EUR/USD is currently set at 1.1700, with a consensus range spanning from a low of 1.1200 to a high of 1.2000. Specific targets from other firms include: - RBC: Dec-26 target at 1.2000 - Morgan Stanley: Dec-26 target at 1.2150 - ING: keeping targets at 1.1700 for Dec-26
This interpretation contrasts slightly with ING's outlook, which has lowered their target for EUR/USD to 1.16 for the same period. Notably, our estimates are clustered towards the higher end of the current market predictions.
How other firms see it
Several firms are aligned with a bullish view on the dollar, notably RBC with targets affirming dollar strength against multiple currencies, emphasizing the divergence in central bank policies. On the contrary, firms like Stanchart project a weaker EUR/USD alongside their more conservative dollar forecasts.
Related pairs to monitor include USD/JPY, which reflects broader Fed sentiment, and the correlations to the anticipated ECB policy shifts, which may create added volatility in the cross.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01ING’s revisions suggest a stronger USD outlook, especially for USD/JPY.
- 02EUR/USD targets have been revised down as a reflection of diverging monetary policy.
- 03Current market positioning reflects broader Fed expectations despite mixed economic indicators.
- 04Watch for further updates as economic data unfolds in the upcoming months.
Market implications
Traders should focus on potential adjustments as USD/JPY edges closer to the newly revised target of 160, which could signal further strength. A break above recent levels near 161.29 could catalyze buying interest, particularly if the Fed shores up expectations with hawkish indications ahead of upcoming meetings.
Risks to this view
Should job creation show unexpectedly strong growth or if inflation indicators drift significantly higher, the Fed may be pressured to reconsider the pace of rate hikes, potentially reversing current bullish sentiment towards the dollar. Additionally, any signs of acceleration in European growth could lead to a reevaluation of ECB policy, creating downward pressure on USD pricing.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Goldman Sachs | Bearish | 1.1200 |
J.P. Morgan | Bearish | 1.1300 |
UOB | Bullish | 1.1800 |
Reports Report ING Monthly: Weathering the shocks Published 11:53 The most striking thing about this summer isn’t the string of unprecedented shocks. It’s that the global economy has barely flinched Carsten Brzeski Download PDF Executive summary Energy: We have revised our oil and gas forecasts higher with little sign of a breakthrough between the US and Iran. European natural gas remains vulnerable into winter.
Bond markets: It’s tough to see the pressure for higher long-end yields magically dissipate. We have an end-year forecast for the US 10-year of 4.90% and the risk is that we have to endure an overshoot before things structurally calm. United States: A hawkish speech by Fed Chair Kevin Warsh makes a September rate hike look probable.
But we think that tepid job creation and cooling inflation mean this needn’t turn into a series of hikes. Eurozone: The stage is set for another rate hike this month but for now we think this will be the last. China: Given the soft start to the second half and signs that policy support will remain relatively modest, we’re trimming our 2026 GDP forecast slightly – to 4.6% YoY from 4.7%.
UK: Contrary to market pricing, we think the combination of a fragile jobs market and cooling core inflation should help unlock Bank of England rate cuts in 2027. Japan: We expect a Bank of Japan rate hike in September and two follow up moves in January and April 2027. Central and Eastern Europe: Poland remains resilient despite energy and fiscal risks; Czech growth is firm and inflation contained, but the Czech National Bank remains vigilant; Hungary’s recovery may revive assets, while Romania still faces stagflation and political uncertainty.
FX: In light of a more hawkish Fed outlook, we now expect the dollar to stay stronger for longer. We are dropping our year-end 2026 EUR/USD forecast to 1.16 from 1.18 and raising the USD/JPY profile to 160 from 158. Included in the following bundle Bundle Published 11:55 ING Monthly: Weathering the shocks This bundle contains 15 Articles Monthly 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 Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download
Sources & References
How we cover this story
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