Carsten: The global economy at half time
At a Glance
The desk assesses that a potential turnaround for the global economy could encourage currency strength, especially in EUR/USD and USD/JPY. Per the full note , Carsten Brzeski suggests a chance for a respectable second-half performance despite challenges. Current EUR/USD trades at 1.1434, while USD/JPY shows an even sharper dynamic at 161.6930, indicating trader positioning could shift amid changing expectations. The prevailing sentiment stands against the backdrop of a lack of immediate high-impact events, suggesting a quieter market ahead.
Key Takeaways
- 01The desk anticipates a potential upside for EUR/USD in H2 2023.
- 02Denoting significant divergence in consensus expectations for USD/JPY.
- 03Global economic changes could shift momentum dynamics in FX markets.
- 04Positional adjustments may be necessary in the absence of immediate high-impact economic events.
Full Analysis
What the desk is arguing
The desk argues that a shift in global economic momentum could support potential rallies in key currency pairs, notably EUR/USD and USD/JPY. Per the full note , Brzeski reflects on the global economy's precarious position entering the second half of the year, likening it to a sports match where momentum can swing unexpectedly.
Data from our internal forecasts shows consensus expectation on EUR/USD ranging from 1.1200 to 1.2000, with a median target of 1.1700 by March 2026. This reflects a bullish outlook compared to USD/JPY consensus expectations, which are notably lower, citing a median target at 155.0000 for March 2026.
The alternative read would suggest a significant setback in global economic conditions could prevent any upward movement in these pairs, a concern that traders should remain aware of as they review longer-term positions.
Where it sits in our coverage
For EUR/USD, the current spot price of 1.1434 is within a consensus target range of 1.1200 to 1.2000, with specific firm targets like commerzbank predicting 1.1900 by March 2026 and ub anticipating a 1.2000 level. In comparison, USD/JPY's spot at 161.6930 is significantly higher than its consensus target range of 149.0 to 161.7145, with commerzbank and scotiabank projecting targets of 149.0 and 154.4225 for March 2026.
The desk's outlook on EUR/USD aligns closely with consensus while being at the median point, suggesting traders are optimistic about a potential euro appreciation against the dollar in the medium term.
How other firms see it
Aligned firms like goldman and hsbc both have EUR/USD targets set around 1.1800 for March 2026, sharing a bullish sentiment on the pair. In contrast, firms like citi anticipate a more conservative 1.1300 target for the same period, suggesting a disparity in confidence levels regarding the euro's potential.
The EUR/USD trajectory mirrors trends in ECB monetary policy adjustments, while USD/JPY's future direction will likely be influenced by BoJ rate decisions, which could have a significant spillover effect.
Market Implications
Market participants should watch the 1.1500 level in EUR/USD as a psychological threshold, with the potential for buyers if momentum improves. Additionally, shifts in BoJ or ECB policy could catalyze movement in USD/JPY trading, making these events critical for positioning.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bearish | 1.1140 |
ABN AMRO | Bullish | 1.1500 |
Bank of America | Bullish | 1.1500 |
From the original
Articles Carsten: The global economy at half time Published 11:12 Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download One lesson from both football and economics is that momentum can change quickly. After a bruising first half, the global economy still ha
Related speeches
4 itemsFX Daily: Looking for stabilisation
The desk interprets current market dynamics as a moment of stabilization for the euro, anticipating a potential rebound against a strong dollar. Per the full note, this calm in risk sentiment could allow EUR/USD to maintain levels above 1.130. In light of expected US data, particularly the core PCE, the path forward suggests a bearish USD potential, with the market pricing in a quasi-dovish Fed stance for December. Recent consensus reflects a broad range for EUR/USD targets, indicating a divided outlook among leading firms.
Global FX: EU deep dive, US roundup, back to school themes
The desk interprets the latest commentary from J.P. Morgan as reflecting a crucial moment for EUR/USD dynamics influenced by growth and fiscal developments in the Euro area and upcoming U.S. economic indicators. Per the full note, the conversation underscores a resilient Euro amidst lower yields, signaling potential instability for the greenback. The ongoing narrative positions EUR/USD to engage with a carry trade bias as fiscal policies unfold both in Europe and the U.S. Their mention of critical U.S. events — particularly inflation data and payroll figures — highlights catalysts likely to impact trader sentiment through fall. Given the current spot at 1.1446, our consensus among firms has a median target of 1.1700, with a range of expectations spanning from 1.1200 to 1.2000.