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14 January 2026

G10 FX Talking: Dollar can stay supported in the first quarter

After a 10% sell-off last year, we expect the dollar to find some stability through Q1. Seasonals should help the dollar this quarter, and US economic data looks unlikely to fall off a cliff. Dollar strength may be most felt against the yen, and intervention looks likely in the 160/162 area over the coming weeks

Chris Turner

Global Head of Markets and Regional Head of Research for UK & CEE

Francesco Pesole

FX Strategist

The dollar can probably stay strong in Q1 on seasonals

Main ING G10 FX Forecasts

	EUR/USD		USD/JPY		GBP/USD
1M	1.17	→	157	↓	1.34	↓
3M	1.18	↑	155	↓	1.34	↓
6M	1.20	↑	155	↓	1.35	→
12M	1.22	↑	152	↓	1.36	↑

	EUR/GBP		EUR/CHF		USD/CAD
1M	0.87	→	0.93	→	1.40	↑
3M	0.88	↑	0.93	→	1.38	→
6M	0.89	↑	0.94	↑	1.37	↓
12M	0.90	↑	0.97	↑	1.36	↓

EUR/USD: Choppy first quarter

Spot	One month bias	1M	3M	6M	12M
EUR/USD 1.17	Neutral	1.17	1.18	1.20	1.22

Having sold off on December seasonals, the dollar should find some more support in the first quarter. US data has remained quite firm – certainly not weak enough to demand early Federal Reserve easing. That said, our team favours more Fed rate cuts in March and June compared to a market pricing June and December.
Political pressure on the Fed is leading to some dollar selling. However, investors are wary of chasing this theme and unless the Department of Justice charges Fed Chair Jerome Powell, we think the market will remain reluctant to push the ‘Sell America’ theme on this.
Our base case remains that fiscally-inspired eurozone growth emerges from 2Q onwards and it is euro strength which delivers 1.22 by the end of the year.

USD/JPY: Snap elections pose one more risk to the yen

Spot	One month bias	1M	3M	6M	12M
USD/JPY 158.00	Neutral	157.00	155.00	155.00	152.00

The New Year has started with a focus back on Japanese politics. Here, the popular PM, Sanae Takaichi, is considering a snap election in February to secure an LDP majority in the Lower House. The view here would be that, if successful, she could pivot more towards super-loose fiscal and monetary policy – weakening the yen. Given Japanese CPI should be subdued in the first quarter, this looks the most likely window for 160/162 in USD/JPY.
That said, we suspect Tokyo would still intervene at 160. You never know, but the US could join them in bilateral intervention since it would be in Washington’s interests as well.
The case for the yen to recover on undervaluation is weakening.

GBP/USD: Positioning and BoE provide temporary relief

Spot	One month bias	1M	3M	6M	12M
GBP/USD 1.35	Neutral	1.34	1.34	1.35	1.36

Sterling is enjoying a brief renaissance, helped by the Bank of England which was less than dovish in December, and a buyside which had found themselves heavily short sterling in late November. On the BoE story, we favour two further 25bp cuts in March and June in the 3.75% policy rate. Headline inflation should be falling below 2% in April and the BoE should have less to fear over sticky wage inflation – a key worry for them in December.
Also helping sterling has been a UK government trying to get a little closer to Europe, with the focus now on ‘dynamic alignment’.
There is still a risk that PM Keir Starmer and Chancellor Rachel Reeves could be forced out after local elections in May – a big £ negative.

EUR/JPY: Hard to fight this powerful trend

Spot	One month bias	1M	3M	6M	12M
EUR/JPY 185.00	Neutral	184.00	183.00	186.00	185.00

Looking at the potential forces driving the euro and yen this year it is hard to stand in the way of this powerful bull trend. On the yen side, PM Sakaichi’s policies are yen-negative and the next Bank of Japan rate hike may not emerge until December. On the euro side, we are looking for a better year here, where fiscal stimulus powers eurozone growth higher sequentially. 200 seems an impossible number for EUR/JPY – but we traded close in 1990.
The Japanese have a bigger problem with a weak yen than the European Central Bank has with a strong euro. The ECB seems more interested in EUR/USD – particularly its speed of appreciation.
A substantial change in the benign risk environment is probably the main threat to EUR/JPY this year.

EUR/GBP: Bull market correction

Spot	One month bias	1M	3M	6M	12M
EUR/GBP 0.87	Neutral	0.87	0.88	0.89	0.90

On reflection, the market had probably been too bearish on sterling in late November – positioning in the asset management community certainly suggested that. While we can’t rule out a further correction towards the 0.8600 area, we are still happy to sit with a multi-quarter bullish EUR/GBP view.
Further rate cuts amid declining inflation in the UK should be offset against a stronger eurozone growth story this year. And in late ‘26, the market could well be focusing on ECB rate hikes.
The biggest downside risk to EUR/GBP may come from somewhere like French politics/budget weighing on the euro. Or the UK Labour government surprising with a big pro-EU push.

EUR/CHF: Waiting on the eurozone upturn

Spot	One month bias	1M	3M	6M	12M
EUR/CHF 0.93	Neutral	0.93	0.93	0.94	0.97

There remains a lot of discussion about the dollar de-basement trade in light of the pressure on US institutions. Gold and the Swiss franc continue to be seen as the go-to safe havens – perhaps a factor keeping EUR/CHF down at 0.92/0.93 despite the ECB policy rate remaining 200bp higher than that of the Swiss National Bank. Notably, however, the SNB has not been intervening to support EUR/CHF – it hardly bought any FX in 3Q25, having bought CHF5bn in 2Q25.
Our mildly bullish call this year is on the back of the euro strength we expect to come through from 2Q onwards as German fiscal stimulus starts to cement an improvement for eurozone industry.
Swiss growth is still seen weak in 2026 near 1%.

EUR/NOK: Waiting for improved external picture

Spot	One month bias	1M	3M	6M	12M
EUR/NOK 11.75	Neutral	11.80	11.70	11.50	11.40

Norway’s inflation remains a wild card for the krone. Consensus has failed to track price volatility, as soft November figures were followed by a hot print for December. With core CPI above 3.0% year-on-year (now 3.1%), Norges Bank shouldn’t make any dovish shift at the 22 January meeting.
All this is challenging our call for three cuts by year-end, but we still think that inflation will have moderated enough for a cut in May or June – priced at 6bp and 15bp, respectively.
Our relatively dovish call doesn’t hugely influence our medium-term bullish NOK view, which is still based on solid fundamentals. In the near term, we see some upside risks for EUR/NOK amid a more challenging risk environment.

EUR/SEK: Looking cheap in the near term

Spot	One month bias	1M	3M	6M	12M
EUR/SEK 10.70	Mildly Bullish	10.80	10.70	10.50	10.40

The krona’s exceptional 2025 performance is extending into the new year, but we think further EUR/SEK depreciation in the near term would be a bit stretched. The pair is already trading close to 2.0% undervaluation, and we think it can trade back above 11.80 before re-entering a downward trend.
November GDP came in strong, with YoY growth at 2.7%, underpinning the krona’s solid medium-term outlook.
The Riksbank is unlikely to signal anything different anytime soon, and the market may well keep speculating on a hike in the coming year (now 20bp priced in) even though that’s not our base case.

EUR/DKK: Unusual activity

Spot	One month bias	1M	3M	6M	12M
EUR/DKK 7.47	Neutral	7.47	7.47	7.46	7.46

The EUR/DKK forward market has shown some unusual upside volatility in January. We dissect those moves in this note.
While we suspect there is some hedging/speculation on a potential US-Denmark direct confrontation over Greenland, we believe the central bank is intervening in spot, which is having a knock-on effect on FX forwards liquidity - exacerbating the moves.
So far, those moves aren’t concerning, particularly considering Danmarks Nationalbank has grown its reserves to c.25% of GDP and has therefore plenty of ammunition to defend the EUR/DKK peg at much narrower ranges than the +/- 2.25% ERM II band.

USD/CAD: Loonie feels some Venezuela effect

Spot	One month bias	1M	3M	6M	12M
USD/CAD 1.39	Mildly Bullish	1.40	1.38	1.37	1.36

Markets have started to price in a rate hike in Canada by the end of this year: we think that is premature, but we no longer expect another rate cut.
The Venezuela events left some marks on CAD, as Canada’s heavy crude may be the most negatively affected by an increase in supply from Venezuela. The Western Canada Select traded at a $15 discount to WTI at one point in early January.
We remain unexcited about CAD’s prospects. Unemployment is on the rise again (6.8%) in Canada, and the upcoming USMCA renegotiation may be rocky and add to economic uncertainty. We think a return to 1.40 in the near term is possible.

AUD/USD: Hike speculation a bit premature

Spot	One month bias	1M	3M	6M	12M
AUD/USD 0.67	Neutral	0.67	0.68	0.69	0.70

The Aussie dollar has held gains at the start of 2026, partly thanks to markets now fully discounting a rate hike by this summer.
Inflation has indeed remained elevated, with core measures struggling to find their way below 3.0%, but we haven’t seen enough to call for rate increases yet. Recently, consumer sentiment has dipped on the back of monetary tightening fears, and that may contribute to keeping the central bank on hold for longer.
Aside from this, we still like some upside in AUD/USD over the course of 2026, but the pair is close to medium term fair value and should appreciate at a slower pace from now on.

NZD/USD: Improved outlook

Spot	One month bias	1M	3M	6M	12M
NZD/USD 0.58	Neutral	0.58	0.59	0.59	0.60

The Reserve Bank of New Zealand is another central bank now expected by markets to hike rates by the end of 2026. We see slightly higher chances of this happening in New Zealand and Australia, even though pricing is more dovish for the Reserve Bank of Australia.
The main reason is the starting point: 2.25% rates in NZ relative to 3.60% in Australia. We have had the suspicion for a while the RBNZ went too far with rate cuts, and the risks are of further stickiness in services inflation.
Anyway, we’ll need to hold that thought until Governor Anna Breman’s first policy meeting in February. Our NZD/USD view remains in line with AUD/USD, with slightly higher upside potential for the NZD.

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14 January 2026

FX Talking: Choppy waters, Teflon dollar This bundle contains 6 Articles

Authors

Chris Turner

Global Head of Markets and Regional Head of Research for UK & CEE

Francesco Pesole

FX Strategist