FX Daily: EUR/USD gears up for a 1.10 test

USD: Hawkish skew ahead The combination of hawkish Fedspeak and a US CPI beat earlier this week continues to pay dividends for the dollar. DXY is now back at Liberation Day (April 2025) levels, with real front-end rate differentials continuing to fuel strong dollar momentum. Importantly, this remains a rates-driven move, with contained excessive USD strength relative to short-term fair value currently built in.

In our estimates, stretched undervaluation vs USD is only visible against the euro, consistent with the French-related premium, and SEK, which tends to underperform fundamentals during hawkish repricing as both an activity currency and a low yielder.

This environment is also preventing high-beta currencies from drawing any benefits from the extension of the equity rebound. The resilience to both Nvidia’s idiosyncratic losses and the repricing higher in interest rates is sending a rather strong signal of solidity in the AI trade at the moment.

We continue to see upside risks for the dollar in the coming days. The Fed’s Chris Waller has put a 50bp December move on the radar, and that should keep markets biased towards hawkish interpretations of incoming data. December pricing remains at 28bp, leaving scope for further adjustment. Today’s home sales data are unlikely to matter, but tomorrow’s PPI will. That may be the catalyst for another USD leg higher.

This story was originally published by Hellenic Shipping News. Read the full story at Hellenic Shipping News →