FX Talking

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15 September 2025

G10 FX Talking: Dollar decline set to resume in fourth quarter

After a couple of months of stability, we look for the dollar decline to resume through the fourth quarter. Our baseline is that the Fed cutting rates back to neutral without a US recession is consistent with a benign decline in the dollar, rather than the disorderly sell-off seen in April. Activity currencies should perform quite well in this environment

Chris Turner

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

Francesco Pesole

FX Strategist

Our baseline is that the Fed cutting rates back to neutral without a US recession is consistent with a benign decline in the dollar

Main ING G10 FX Forecasts

	EUR/USD		USD/JPY		GBP/USD
1M	1.18	↑	145	↓	1.36	↑
3M	1.20	↑	140	↓	1.38	↑
6M	1.20	↑	138	↓	1.36	↑
12M	1.22	↑	136	↓	1.37	↑

	EUR/GBP		EUR/CHF		USD/CAD
1M	0.87	↑	0.93	↑	1.38	→
3M	0.87	↑	0.93	↑	1.37	↓
6M	0.88	↑	0.94	↑	1.37	↓
12M	0.89	↑	0.96	↑	1.35	↓

EUR/USD: Looking for the fourth quarter rally

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

The main conclusion to draw over the last month is that the Federal Reserve’s resistance to easier policy has crumbled. Jobs data has come in softer across the board, and the feared pick-up in tariff-induced inflation has failed to materialise. The market is now pricing a 125-150bp Fed easing cycle into next summer.
Yield differentials have moved firmly against the dollar, but it has remained steady. Seasonal factors such as US corporate tax payments may be keeping it bid in September, but from October onwards the dollar should drop as the Fed cuts by 75bp this year.
The European Central Bank has finished its easing cycle at 2.00%, but our 1.20 year-end EUR/USD call largely hinges on a broad dollar decline.

USD/JPY: Why is USD/JPY staying so strong?

Spot	One month bias	1M	3M	6M	12M
USD/JPY 148.00	Bearish	145.00	140.00	138.00	136.00

US interest rates have dropped sharply, but USD/JPY is staying bid near 147/148. What’s going on? Tokyo contacts suggest it is factors like politics, M&A and corporate flows. On the first of those, the Liberal Democratic Party (LDP) holds a leadership election on 4 October. Should Sanae Takaichi win, investors will factor in more Abe-like ultra-loose financial conditions, including a delayed Bank of Japan rate hike.
There’s also the question of whether Japan’s commitment to invest $550bn into the US as part of the trade deal will help the dollar.
But US rates are heading lower and will make it easier for Japanese investors to hedge their large holdings of US assets. We still favour a BoJ hike on 30 October and a stronger yen.

GBP/USD: Tight monetary battles tighter fiscal policy

Spot	One month bias	1M	3M	6M	12M
GBP/USD 1.35	Mildly Bullish	1.36	1.38	1.36	1.37

Monetary and fiscal policy will be working at odds in the UK and won’t be good for UK growth. The Bank of England was surprisingly hawkish in August, only cutting rates to 4.00% by a 5-4 vote. The BoE credibly argues that with inflation close to 4%, it cannot sound the all-clear. The market now prices just 50bp of BoE easing over the next 12 months. But we think inflation can turn lower more quickly and still see risk of a November rate cut.
The BoE’s hawkish pivot stands at odds with a Labour government set to tighten fiscal policy at the 26 November budget. Taxes will be rising as the Chancellor seeks to plug a £20-30bn black hole. Not great news for GBP, but the softer dollar should dominate here, and GBP/USD can end the year towards the highs.

EUR/JPY: Staying stronger

Spot	One month bias	1M	3M	6M	12M
EUR/JPY 173.00	Mildly Bearish	171.00	168.00	166.00	166.00

The yen is under-performing across the board as local Japanese issues dominate. The yen is very undervalued, but if Japanese politics head towards looser monetary and fiscal conditions, the yen may stay undervalued for longer. 4 October is the big day here, and opinion polls may dictate price action this month.
On the euro side, French politics have shown no real sign of holding the euro back. This is because France is seen as a local issue, while other governments in Europe, e.g., Italy, have been given sovereign upgrades this year.
Asset managers are long yen, but the leveraged fund community is aggressively adding to yen shorts – perhaps for carry funding.

EUR/GBP: Upside risks

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

The BoE’s hawkish pivot in August has undoubtedly helped EUR/GBP back into the 0.86-87 range. It may well stay there for the rest of the year. The risks to that view, however, looked skewed to the upside. At some stage, the government should tighten fiscal policy, wages and services prices should come down, and a deeper BoE easing cycle than is currently priced should hit the pound. That may not be a story until the first quarter of 2026.
Before then, the market will keep close watch on UK jobs and price data, plus UK GDP tends to tail off late in the year.
In the eurozone, markets are still half-considering one final ECB cut. Any downside CPI surprises might hit the euro now.

EUR/CHF: SNB unlikely to take rates negative again

Spot	One month bias	1M	3M	6M	12M
EUR/CHF 0.93	Mildly Bearish	0.93	0.93	0.94	0.96

The Swiss franc remains very strong. Not only in nominal terms, but in real terms too. So it was a surprise to hear Swiss National Bank Governor Martin Schlegel downplaying currency strength a little. One might have thought he’d be worried with CPI now running at just 0.2% year-on-year. And the SNB could revise down its CPI forecasts.
That brings us to the main event in September, the policy meeting on the 25^th. While Schlegel says the SNB won’t hesitate to take rates negative if needed, we expect the policy rate to stay at zero. The market only prices 15bp of easing in the next 12 months.
With very little to turn this strong CHF trend around, we expect EUR/CHF to stay near 0.93 into year-end.

EUR/NOK: Close call on Norges Bank

Spot	One month bias	1M	3M	6M	12M
EUR/NOK 11.60	Mildly Bullish	11.70	11.50	11.35	11.10

EUR/NOK has broken lower on the back of a supportive external environment and a hawkish repricing in rate expectations.
Underlying inflation stayed above 3% in August, meaning the September Norges Bank meeting is close to a toss-up. As discussed here, a cut (15bp priced in) looks slightly more likely.
If we are right with our NB call, then EUR/NOK is due an upward correction in the near term. A hold would add some fuel to the krone’s rally, which, however, is already looking a bit stretched, and we therefore would be wary of chasing it too aggressively just yet. Our medium-term view remains unchanged and NOK-bullish.

EUR/SEK: Krona looks expensive

Spot	One month bias	1M	3M	6M	12M
EUR/SEK 10.95	Mildly Bullish	11.00	10.90	10.70	10.50

We admit that the risks of another cut by the Riksbank have increased of late, and a September move is 10bp priced in.
But for now, we are sticking with our call for no more cuts, as economic indicators point to a decent growth outlook, real rates are already quite accommodative, and alternative measures of unemployment are less concerning than the headline figure.
That doesn’t mean EUR/SEK has much to fall, though. The pair is quite cheap relative to its short-term fair value, and a rebound may be on the cards regardless of a hawkish RB. But like for NOK, fundamentals point to lower EUR/SEK in the medium term.

EUR/DKK: Euro adoption debate resurfaces

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

EUR/DKK faced some extra upward volatility, touching a 7.468 high earlier in September before easing back lower. There is a possibility that the central bank intervened to ease pressure on the Danish krone.
Potentially driving DKK weakness were the Danish central bank governor’s comments on the benefits of adopting the euro to strengthen ties with the EU. He admitted the decision would, however, be entirely political, and latest polls suggest most Danes remain unfavourable towards joining the eurozone.
Given Denmark’s high FX reserves (around 23% of GDP), the EUR/DKK peg can be easily protected by intervention if needed, and we see few reasons to expect major deviations from 7.460.

USD/CAD: CAD outlook won’t improve

Spot	One month bias	1M	3M	6M	12M
USD/CAD 1.38	Neutral	1.38	1.37	1.37	1.35

Markets have continued to align with our call for two rate cuts by the Bank of Canada by year-end. OIS pricing is now 41bp for December, with a September cut fully priced in.
Our call remains for 25bp reductions in September and December, as poor trade relationships with the US continue to bite the economy. Unemployment rose to 7.1% in August after a 66k drop in hiring, and Prime Minister Mark Carney’s announced energy projects will take time to pay dividends for the economy.
The Canadian dollar should remain a laggard in an environment of further USD weakening, both due to correlation with the worsening US economic picture and domestic factors outlined above.

AUD/USD: Staying bullish

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

We continue to see good upside potential for the Australian dollar. A benign Fed cutting cycle is a good environment for AUD/USD, and the relative quietness on US-China trade disputes should help too.
Meanwhile, Australia’s inflation spiked to 2.8% in July (trimmed mean to 2.7%). Paired with a decline in the unemployment rate to 4.2% plus stronger than expected GDP and wage growth for Q2, we feel all the more confident with our call for only one rate cut by the Reserve Bank of Australia for the remainder of the year.
Markets are pricing in 23bp for November, but there is a decent possibility the cut will only come in December, further bolstering AUD’s short-term appeal.

NZD/USD: Lifted by Fed, held back by RBNZ

Spot	One month bias	1M	3M	6M	12M
NZD/USD 0.60	Neutral	0.60	0.60	0.61	0.61

The Reserve Bank of New Zealand is openly signalling another 50bp of easing by year-end (meetings in October and November), with the market currently pricing in around 41bp.
The NZ dollar remains less attractive than AUD as the dovish bias of the RBNZ can prompt markets to speculate on an outsized 50bp should GDP, CPI, or employment data materially undershoot.
The offsetting factor that makes us still constructive on NZD/USD is our call for additional USD weakness. Like for AUD, NZD would normally fare well in an environment of lower USD rates as long as risk sentiment stays upbeat.

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This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

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Authors

Chris Turner

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

Francesco Pesole

FX Strategist