Currency volatility: Will the US dollar regain its strength? - J.P. Morgan

What the desk is arguing

J.P. Morgan's analysis focuses on whether the US dollar can reassert its strength after a period of volatility. The desk argues that while the dollar has faced headwinds, underlying fundamentals may support a rebound. Factors such as interest rate differentials and geopolitical stability are cited as potential catalysts for renewed dollar strength.

However, the counterfactual that the desk implicitly rejects is that the dollar's weakness is structural rather than cyclical. J.P. Morgan appears to dismiss the notion that the dollar's recent decline marks a long-term trend shift, instead viewing it as a temporary correction within a broader bullish cycle.

Where it sits in our coverage

Our consensus for EUR/USD is 1.075, with a spread of 1.04-1.12, aligning with a view that the dollar could strengthen from current levels. This outlook is broadly consistent with J.P. Morgan's thesis, though we incorporate a wider range of outcomes to account for uncertainty.

J.P. Morgan's specific target for EUR/USD is 1.10 by March 2026, while Barclays expects 1.04 and BofA sees 1.04 over the same horizon. Our internal view sits between these extremes, reflecting a balanced risk assessment.

How other firms see it

Barclays and BofA hold contrary stances, forecasting EUR/USD at 1.04 by March 2026, implying a weaker dollar. Their views diverge from J.P. Morgan's bullish dollar narrative, emphasizing sustained euro strength.

Aligned firms include Standard Chartered with a target of 1.10, and Citi at 1.08, both supporting a stronger dollar. This split highlights the ongoing debate in the market.