In a poll taken during our Economics Live webinar yesterday, 25% of respondents felt EUR/USD would end the year over 1.13, while 46% felt it would remain roughly stable in a 1.10-1.13 range. This was a subtle shift from poll results in early June which showed 47% expected EUR/USD to end the year in a 1.07-1.11 range and 30% expected 1.02-1.07, ING’s FX strategist Chris Turner notes.

DXY to trade well within a 101-102 range

“Stunningly, only 1% of respondents now expect EUR/USD to end the year sub 1.07. The shift in tone no doubt reflects the most recent experience of a 5% dollar sell-off since early July and the certainty that the Fed is about to embark on an easing cycle. As we cautioned in the webinar, we have a slight downside dollar bias ahead of the US elections in early November, but thereafter scenario analysis takes over. “ 

“In terms of short-term inputs to the dollar story, yesterday's poor JOLTS job opening data saw the Fed's terminal rate in two years' time priced at a new low – the 1m USD OIS priced two years' forward is now 2.85%. In other words, the market is toying with a sub-3% terminal rate, which is dollar-bearish. The discount of the two-year Treasury yield to Fed Funds is currently very deep at 175bp, but presumably once the Fed starts cutting, short-dated US yields can take another leg lower and soften the USD.”