Carsten: Weathering the shocks
At a Glance
The desk posits that despite significant geopolitical and economic shocks this summer, the global economy appears resilient, albeit possibly mispriced. Per the full note, the emerging risk is a bond market sell-off linked to rising rates, which could weigh heavily on growth. Current leading indicators suggest continued, albeit subdued, growth ahead. With our internal targets for EUR/USD at 1.1700 by Mar-26 and USD/JPY at 155.0000, the market is largely pricing in the dislocation from current geopolitical tensions and central bank pivots. There are no high-impact calendar events ahead that may disrupt this outlook.
Key Takeaways
Full Analysis
What the desk is arguing
The desk frames this as an intriguing paradox; despite numerous shocks — from climate events to geopolitical tensions — the resilience of the global economy is notable. The rising concern revolves around the bond market's reaction to these shocks, particularly the risk posed by increasing rates which could lead to weakened economic performance.
Central to this narrative is the shift in market pricing regarding geopolitical stability, especially in the Middle East, and its impact on oil prices and inflationary expectations. The commentary highlights that this unexpected resilience may not hold permanently, especially with monetary tightening continuing as a factor in economic assessments.
Where it sits in our coverage
For EUR/USD, the consensus target is 1.1700, within a range of 1.1200–1.2000, while for USD/JPY it stands at 155.0000 with a broader consensus ranging between 149.0000 and 161.7145. Specific Dec-26 targets include: - ing: EUR/USD at 1.1700, USD/JPY at 152.0000 - rbc: EUR/USD at 1.1700, USD/JPY at 147.0000 - morganstanley: EUR/USD at 1.2150, USD/JPY at 140.0000
This view aligns with the broader cross-firm consensus, with positions generally clustering around similar targets for EUR/USD, indicating a consistent outlook on the pair. However, USD/JPY sits at the lower end of the collective range, highlighting potential divergence from bullish perspectives.
How other firms see it
The prevailing view among aligned firms such as ing and rbc suggests a cautious outlook consistent with the desk's stance on EUR/USD, while morganstanley appears more bullish on both pairs, indicating disparate assessments of the underlying economic resilience.
Monitoring the USD/JPY trajectory can serve as a barometer for market reactions to potential interventions from the Bank of Japan, particularly around inflation data and rate path expectations.
Market Implications
Watch for any significant movement in bond yields, as a continued uptick could pressure both the EUR/USD and USD/JPY. Given our targets, a shift in sentiment ahead of Q4 earnings could catalyze further volatility.
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: Weathering the shocks Published 11:50 Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The most striking thing about this summer isn’t the string of unprecedented shocks – it's that the global economy has barely flinched. But a
Related speeches
4 itemsING Monthly: Weathering the shocks
Lead — The desk views the recent adjustments made by ING as indicative of a stronger dollar outlook, extending the bullish sentiment for USD/JPY and a shift in EUR/USD forecasts. Per the full note from ING, revisions include a hawkish Fed outlook driving an increase in year-end USD/JPY targets to 160 from 158, while EUR/USD targets have been reduced to 1.16 from 1.18. This recalibration reflects the Fed's probable rotation towards a more aggressive monetary stance despite slower job creation and inflation dynamics. With the current spot at 1.1446 for EUR/USD and 161.2860 for USD/JPY, traders should remain alert to market response as these forecasts diverge from general market sentiment.