Perspectives and outlook

• Following weak jobs data and milder inflation, the probability of a Fed rate hike in October has fallen below 25% (see more).  The Fed is expected to pause in October, raise rates in December and then remain on hold for an extended period in 2027. This scenario should anchor interest rates and limit further upside for the dollar (see more). The ECB is expected to keep rates unchanged in October and raise them again in December. Lagarde reiterated that the ECB has its Transmission Protection Instrument (TPI) available to stabilize debt markets if necessary (see more).
• We believe the sell-off in the euro has been overdone. We are watching support at the 1.1111 lows and key resistance at 1.13. With Brent above $100/bbl, a sustained recovery above that level will be difficult (see more).

Forecasts - [October 5] - (see here).