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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 39 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 39 institutional desks. No promotion.
The current assessment from the desk highlights a robust US economic growth in Q3, with GDP expanding at an annualized rate of 3.4%, primarily driven by strong consumer spending and business investment linked to the technology sector. Per the full note , the surge in imports, particularly from countries like South Korea and Taiwan, fully offset the GDP contributions from gross private domestic investment, suggesting a cooling momentum heading into Q4 despite persistent inflation pressures. While the Fed appears poised for a rate hike in December, the market should prepare for potential shifts in currency valuations as these economic dynamics unfold. Overall, this nuanced view reveals both the strength and fragility of the US economic recovery, indicating that traders may need to position carefully against evolving inflation indicators and global trade dependencies.
The desk emphasizes that while US growth remains strong, the momentum is showing signs of cooling, especially as net trade contributed negatively due to rising imports. Consumer spending appears robust at 3.8% quarter-over-quarter, but September's flat real spending raises concerns about sustainability going forward according to details from the recent report .
Investment has been spurred largely by the tech sector, with gross private investment surging by 19.4%. However, the significant influx of imported goods, which shot up by 26.4%, counteracts much of this growth, leaving the overall impact on GDP muted, evidenced by a flat net trade contribution.
Our consensus target for USD/EUR stands at 1.075, within a range of 1.04 to 1.12. Notable targets from aligned firms reflect a spectrum of perspectives: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.12 (Mar26)
The desk's current reading aligns closely with the jpmorgan forecast, which is near the upper bound of our coverage range, indicating a potential bullish sentiment towards the USD as traders assess upcoming economic indicators.
Generally speaking, firms aligned with a bullish outlook on the USD like jpmorgan align on the ongoing strength of the US economy, while firms such as bofa, which maintain a more cautious view, see potential risks due to the impact of imports on trade balances.
The dynamics between USD/EUR and the Fed’s hawkish stance are critical to monitor, with implications for volatility across related pairs such as USD/JPY and EUR/GBP, as traders gauge how upcoming domestic economic data may influence central bank policies.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should watch for key technical levels around 1.075 in the USD/EUR pair as economic data flows in. The potential December Fed rate hike could lead to positioning shifts, particularly as more inflation data are released.
Risks to this view
A significant decline in consumer spending or a surprising easing of inflation could invalidate the current bullish sentiment, prompting a reevaluation of expectations for US monetary policy and a corresponding reversal in USD strength.
Articles Robust US growth, but momentum is cooling Published 13:40 United States Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The US economy expanded robustly in 3Q, driven by strong consumer performance. Business investment surged, led by tech-related activity, but with many inputs imported, net trade fully offset the capex contribution. Cooler momentum points to slower 4Q GDP growth, but with inflation remaining hot, the Fed looks set to hike rates in December James Knightley US consumer spending was strong in the third quarter 3.4% 3Q GDP growth Hot consumer and investment spending held back by surging tech imports Third-quarter US GDP growth was fractionally stronger than the market anticipated at 3.4% annualised (consensus 3.2%), while the Fed's favoured inflation measure was 0.3%MoM/3.1%YoY in September, as expected.
Within the details, consumer spending reported a robust 3.8% QoQ annualised growth, but momentum was lost as the quarter progressed, based on the monthly profile, with September real spending flat on the month. Gross private investment was particularly strong, surging 19.4%, led by a 20.9% gain in equipment. This is overwhelmingly tied to the tech sector, as can be seen in the chart below.
Structures rose 5.4%, which is also tech related, being heavily orientated towards data centre activity. Intellectual property gained 8.4%, which is also tech-linked, but residential investment fell 3.3% given a lack of affordability for buyers amid elevated mortgage rates. Business capex: tech versus non-tech (YoY% growth) Source: Macrobond, ING "> Source: Macrobond, ING Inflation remains too hot for comfort However, much of the high-value inputs for the tech roll-out are being imported from the likes of Korea and Taiwan.
Goods imports leapt 26.4%, a massive drag on headline US growth. So, while gross private domestic investment contributed 3.3%pp to GDP growth, net trade fully subtracted 3.3pp, leaving a net flat outcome. This narrative of tech investment being offset by tech imports looks set to remain a story in 4Q based on orders numbers.
The squeeze on spending power from weak wage growth and a rising cost of living meant real household disposable income fell 0.3%MoM in September, and this is likely to contribute to a cooler consumer spending story in 4Q, while government spending is also likely to partially reverse the 5.3% jump experienced in 3Q. As such, we are looking at 4Q GDP coming in closer to 2%. On the inflation metrics, there was no surprise, with the CPI and PPI inputs clearly signalling the prospect of a 0.3%MoM increase.
As the chart below shows, this remains too hot for comfort. To achieve 2% annual inflation, the MoM rate needs to trend at 0.17%MoM (the black line). Today’s print was 0.32%MoM.
In consequence, the Federal Reserve is likely to conclude that it has more work to do to bring price pressures under control, leading us to expect a 25bp hike at the December FOMC meeting. Core PCE deflator metrics (% changes) Source: Macrobond, ING "> Source: Macrobond, ING US Inflation GDP Federal Reserve 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 Author James Knightley Chief International Economist, US James Knightley is the Chief International Economist in New York. He joined the firm in 1998 in London and has been covering G7 and Western European economies. He studied economics at Durham… In this article Hot consumer and investment spending held back by surging tech imports Inflation remains too hot for comfort
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