Resume af teksten:
Forventningen er nu, at Federal Reserve og ECB hver hæver renten én gang mere inden årets udgang.
Fed ventes primært at afvente mødet 9. december, medmindre kommende job- og inflationstal bliver meget høje.
Den forventede amerikanske rentetop er 4,25 pct., efterfulgt af en længere pause.
ECB ventes også at hæve renten én gang, blandt andet på grund af oliepriser over 100 dollar pr. tønde.
Bank of England ventes fortsat at fastholde renten ind i 2027, men en renteforhøjelse kan komme ved vedvarende høje energipriser.
Prognosen for Bank of Englands første rentenedsættelse er rykket til tredje kvartal næste år.
De amerikanske 10-årige renter ventes at nå 5,1 pct. ved årets udgang, mens lange eurozonerenter ventes omkring 3,5 pct.
EUR/USD-prognosen ved årets udgang fastholdes på 1,160, men kursen kan falde til 1,140 eller 1,132 ved højere oliepriser og en Fed-forhøjelse i oktober.
Fra ING:
As central bank watchers, we know that predicting what central banks will do is not always the same as what they should do. Wednesday’s Fed meeting and last week’s ECB meeting have shown us that both central banks are not likely to follow the very dovish path we anticipated. This is why we have changed our calls for the Fed and the ECB, now expecting them both to hike rates one more time before year-end.
In the past, students of monetary policy learnt that it is almost always the Fed leading new cycles of monetary easing or tightening. As a good rule of thumb, Europe, whether via the ECB or, previously, the Bundesbank, would typically follow three to six months later. Perhaps we can blame globalisation, more integrated economies and financial markets or simply the same exogenous shocks, but whatever the reason, this time around presents one of those rare occasions when the ECB is actually leading the Fed.
For the next few months, both central banks seem set to move in tandem. This comes as no surprise, given that both central banks are facing the same dilemma: a supply-side shock driven by surging energy prices that has so far produced only limited knock-on effects across the broader economy, set against still-fresh memories of the 2022 inflation surge and delayed central bank responses. At the same time, both the US and eurozone economies show an almost unexpected resilience, though to different degrees.
The much longer-lasting war in the Middle East has not only pushed energy prices to new highs, but also increased the risk that inflation could spread more broadly in the economy. This is why we now expect the Fed and the ECB to hike once more, in order to prevent these knock-on effects from materialising.
If energy prices remain higher for even longer, i.e., into 2027, and/or these knock-on effects materialise faster, both central banks could be forced to hike further. However, this is not our base case scenario, even after our forecast revisions. Our more dovish take, based on a reopening of the Strait of Hormuz before year-end and the fact that firms will not be able to pass through higher costs to consumers, still holds.
We had switched to expecting a September Fed rate hike in the wake of Chair Kevin Warsh’s hawkish Jackson Hole address, but characterised it as a likely one-off recalibration move akin to the single hike delivered by Alan Greenspan’s Fed in 1997. However, the fact that only two FOMC members believe the central bank won’t hike again this year suggests a broader hawkish repositioning has already occurred within the committee.
This has not been driven by economic data. The low-hire, low-fire labour market is keeping a lid on wage growth, which in turn should limit the scope for second-round price effects from higher energy costs. Meanwhile, tariff-related cost increases have largely worked through, with IEEPA tariff refunds providing a cash flow boost to corporate America. The largest component of inflation, shelter, is also looking less threatening, with the stagnant property market contributing to cooling housing rent metrics. We also remain sceptical of so-called “chipflation” given the small weighting within the inflation basket for impacted categories of goods and the fact the US uses hedonic pricing, which incorporates quality improvements into price calculations.
Instead, it appears the Fed is increasingly focused on accelerating the pace at which inflation converges on the 2% target, fearing the protracted conflict in the Middle East will keep energy-impacted components elevated for longer and risk broader cost increases if left unchecked. We now expect this to mean at least one more rate rise.
In terms of timing, there are two more meetings this year. The first is 28 October, but we only have one round of jobs and inflation data between now and then; the proximity to the mid-term elections on 3 November could also prove a complicating factor. Unless the September jobs numbers and inflation data are very hot – which would leave little choice on a hike – we suspect the Fed would prefer to wait until 9 December.
Only 4 of 18 FOMC members anticipate the need for two hikes this year, but eight do expect a second hike next year. That is going to be contingent on the energy story. Our assumption of a Middle East de-escalation, improved energy flows, and lower prices over the next six months would likely mean an additional hike would not be needed – and as such, we forecast a peak of 4.25% followed by a prolonged pause.
Economic growth remains resilient, but the hefty upward moves at the long end of the yield curve will act as a brake on economic activity in an environment where real household disposable incomes have flatlined for 18 months. There are already signs of consumer stress in the form of low savings rates and rising credit card and auto loan delinquencies to levels last seen during the Global Financial Crisis. The lack of business capex growth outside of the tech sector also underscores the concentration risk within the US economy right now. As a result, we tentatively suggest we could start to see the Fed reversing course again from late 2027, particularly if energy prices are experiencing significant falls by then.
Last week’s ECB was not outright hawkish but more subdued and subtle hawkish. Christine Lagarde’s downplaying of the concept of neutral interest rates can be seen as a way to prepare the grounds for further hikes. The fact that the staff projections see headline inflation only dropping below 2% in Q4 2027, while at the same time core inflation is expected to increase slightly were also hidden hawkish messages. At the same time, though, there are currently no signs of knock-on effects from higher energy prices. The risk is high that the ECB’s own models are not fully capturing structural shifts and are overestimating the broadening of inflation in the economy.
Still, oil prices above 100 USD/bbl and the ECB still regretting its too late response to the inflation shock in 2022 are likely to push the ECB towards another rate hike before year-end. A hike that would still fall in the category ‘insurance rate hike’, with an increasing risk that unwarranted damage to the economy could be done.
Looking beyond the next hike, we still think that market expectations of at least two more hikes in 2027 are overdone. It won’t take a lot to undermine the picture of eurozone resilience. A picture that is too obvious also painted in the last ECB projections. GDP growth estimates of 0.3% to 0.4% quarter-on-quarter throughout 2027 and 2028 look highly optimistic. We wonder whether there shouldn’t be more of an adverse effect on growth from higher oil prices and higher interest rates. Already next week’s sentiment indicators (PMIs and Ifo) could change the picture of unbreakable resilience.
As long as there is only very limited spreading of the energy price shock to the rest of the economy, there is very little reason for the ECB to continue hiking next year. Every additional rate hike increases the risk of an unwarranted slowdown of the economy. If we are right and oil prices come down towards the end of this year and knock-effects from higher energy prices remain limited, we don’t see additional rate hikes in 2027. If we are wrong, the story could clearly change.
We’re sticking to our Bank of England call, which is that rates stay on hold into 2027. But this is entirely contingent on energy prices coming lower.
The Bank is still visibly reluctant to hike rates, partly because there’s no sign of second-round effects, and partly because rates are more obviously restrictive than in other economies – particularly with the degree of tightening priced into financial markets.
But at its September meeting, the Bank made it abundantly clear that it’s getting harder not to act. It has indicated that at current energy prices, inflation is likely to narrowly top 4% early next year, if only briefly. And the Bank has said previously that 4%+ inflation is statistically more likely to trigger a wider and more persistent price shock.
If that forecast is maintained at the November meeting because energy prices have failed to come down, then we would expect a BoE rate hike. In that scenario, we’d expect a follow-up hike in the spring.
That 4% inflation forecast is not inevitable. A lot of it rests on the uprating of the regulated energy price cap in January, which in turn depends on average natural gas prices over an ‘observation window’ between mid-August and mid-November. If nothing changes, we’re looking at a 25% increase in energy bills at the start of 2027, but we’re only a third of the way through that window. A fall in gas prices would temper that increase and therefore the overall peak in headline inflation.
Given our call for natural gas and oil prices to move lower through 4Q, we think our existing call for the Bank of England to keep rates on hold into 2027 is still valid for now. We are, however, pushing back our forecast for the first rate cut to 3Q next year.
We’ve nudged higher anticipated end-year 10yr bond yield forecasts. It’s a subtle move, but significant in the sense that it brings into play some key levels. In the US, the key number for the 10yr is now 5.1% at year-end, while for the eurozone we’re in the 3.5% area for long-tenor rates. These levels are not wildly different from where we are now, but importantly, leave open the risk that some overshooting can occur in the intermediate period. That’s a particular theme for the US 10yr where we’ve already closed above 5% twice in recent days. We’re back below now, but we identify ongoing upside pressure for US long rates as a theme in the coming months. The eurozone has tended to share such moves, and will maintain a tendency to do so. Japanese long rates too should remain under pressure, and the same obtains for long-dated UK Gilts.
Front ends have been pricing in sequences of rate hikes for some time now, across all four major central banks. Specifically, so-called “carry spreads” (official rates to the 2yr) in the 75bp to 100bp range signalled market readiness for the delivery of a “few” hikes by central banks, without specificity on timing. This remains the case, with carry spreads of 65bp, 75bp, 90bp and 95bp for the ECB, Fed, BoE, and BoJ respectively. Think of neutrality at around 30bp, and anything above that as an implied market rate hike discount. The actual delivery of rate hikes is important, as it validates the prior evolution of carry spreads and, in turn, acts as a calming influence for long-end rates. We saw some of that play out as the Fed hiked by 25bp and intimated more. It helped calm long-end inflation expectations and take the US 10yr yield back below 5%.
However, even if inflation expectations have nudged lower, there are other pressures that long ends need to contend with. The first is issuance pressure, or more pertinently, the medium-term issuance narrative stemming from fiscal largesse; we can throw in long-duration hyperscaler issuance as a contributing factor, too. That’s the “bad”. Then there’s the “ugly”, in the guise of ongoing energy price pressure stemming from the Iran war. And there is the “good”. Higher real rates have been an important driver, and a part of this likely incorporates AI-driven productivity growth. If that last bit was the central driver, we’d have little to worry about. But it’s the other, more sinister factors that have predominantly sparked long-end market jitters. There’s no doubt that central bank rate hikes help calm such jitters – but they do not make them disappear.
It took some time, but markets have finally developed a laser focus on deteriorating debt dynamics and medium-term financing concerns, particularly in the US. It’s not impossible that we get through the coming months without another significant move higher in long-end yields. However, the balance of probabilities suggests there is at least one more leg of long-end weakness still to play out. In an extreme scenario, this could take US 10-year yields into the 5.25% to 5.5% range. Other markets would likely move in tandem, mapping out similar, albeit less dramatic, blow-outs. Thereafter, we would expect a period of calm, particularly through 2027, as inflation ultimately heads lower. But first, we need to get through 2026.
EUR/USD currently has three primary drivers: short-term rate differentials, oil prices and global risk sentiment. Let’s look at how these can change and impact the pair in the coming quarters based on our updated views.
Short-term rates (neutral impact). The EUR and USD swap rate curves look quite similar in their front-end segment – the most relevant one for the currency market. In both countries, rates are expected to be around 70-80bp above current levels at the end of 1H27. While we’ve revised our central bank calls higher, we remain firmly more dovish than those expectations. One hike each for the ECB and the Fed means similar dovish repricing in both curves in the next couple of quarters. The short-term rate impact on EUR/USD should therefore remain close to current levels into year-end and then gradually tighten throughout 2027. That implies an initially neutral and then gradually positive impact on EUR/USD.
Oil prices (positive impact). The premise of our dovish rate calls relative to the market is that oil prices will come lower and take the pressure off central banks. Our commodities team still targets an $80/bbl average for 4Q26. While the oil-EUR/USD correlation can weaken in an energy price decline, it should support the pair on the margin.
Risk sentiment (positive impact). With the caveat that tech-related jitters can re-emerge at any time, the decline in short-term USD funding costs included in our forecast normally has a positive knock-on effect on FX liquidity and global market sentiment. Lower oil prices would also help in that direction. We expect a positive impact on EUR/USD in our baseline.
Taking all the above into account, we aren’t changing our forecast for year-end in EUR/USD: 1.160 is fully in line with the scenario outlined for these drivers according to our calculations. However, risks are more skewed to the downside in the coming weeks.
We feel that the Fed’s hawkishness has left EUR/USD more vulnerable, and 1.140 can certainly be tested, with risks extending to the 1.132 June lows if oil prices jump again and the Fed hikes rates in October. Looking at 2027, risks are also on the downside relative to our latest forecasts , which included a move to 1.20 by year-end. That’s due to the highest carry attached to USD after two more hikes. That said, if markets start to price in Fed cuts late next year, a broad-based dollar decline remains very possible.
Kilde: ING, https://think.ing.com/bundles/fx-talking-dont-call-it-a-dollar-comeback/
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