The Federal Reserve presented a set of Dot Plot projections for the Fed Funds target which were way above market expectations – this should support the dollar. Economists at ING see EUR/USD as vulnerable to 1.13 over the coming months.
See: EUR/USD to dive towards 1.10 on a 12-month horizon – Danske Bank
Expect the dollar rally sooner
“The dollar is currently at its highs of the year and we expect it to go higher over coming months. Driving this strength is the bullish cocktail of inflation fears and a very hawkish set of Fed dot plots presented in late September.”
“Clearly many things have to fall into place for a tightening takeoff, but our team sees a strong quarter for US growth and the Fed to announce and start tapering in Nov and Dec respectively.”
“A 2-3% dollar rally over the next two months is possible, (EUR/USD to 1.13), but seasonal December USD weakness means 1.17 for year-end.”
