ING customers are getting a little more bearish on the US dollar – ING

In a poll conducted during our Economics Live webinar yesterday, 25% of respondents thought EUR/USD would end the year above 1.13, while 46% thought it would remain roughly stable in the 1.10- 1.13. This was a subtle change from early June survey results, which showed 47% expecting EUR/USD to end the year in a range of 1.07-1.11 and 30% expecting 1.02-1. 07, notes Chris Turner, ING’s FX strategist.

DXY to trade well in a 101-102 range

“Amazingly, only 1% of respondents now expect EUR/USD to end the year below 1.07. The change in tone no doubt reflects the most recent experience of a 5% dollar selloff since early July and the certainty that the Fed is about to embark on an easing cycle. As we warned in the webinar, we have a slight bearish trend for the dollar ahead of the US election in early November, but after that scenario analysis takes over. ”

“On the near-term entries to the dollar story, yesterday’s weak JOLTS jobs data saw the Fed’s two-year terminal rate hit a new low – the $1m two-year OIS price is now 2.85%. In other words, the market is playing with a terminal rate below 3%, which is bearish on the dollar. The cut in the 2-year Fed Funds yield is currently very deep at 175bp, but perhaps once the Fed starts tapering, US short-term yields may drop another step and soften the USD.

“Today, the focus is on ADP employment data, initial claims and the ISM services index. Last night’s release of the Fed’s Beige Book showed that activity has slowed, but that Fed districts have yet to see a material increase in layoffs. Let’s see what this week’s main event brings – tomorrow’s August jobs data. Unless there is a sudden downside to some of today’s numbers, expect the DXY to trade well in the 101-102 range. But the multi-week trend is bearish.”