Futures aren't open yet, but early FX is pointing to risk off gap

What the desk is arguing

The desk frames this as a potential risk-off gap in the FX market, as evidenced by the declines in the EUR, AUD, and NZD. The geopolitical backdrop, particularly Iran's assertive stance on the Strait of Hormuz, is contributing to this sentiment. Per the full note source, the JPY's resilience amidst these developments indicates a flight to safety among investors.

The current market reaction aligns with historical patterns where geopolitical tensions lead to currency depreciation in riskier assets. The EUR has notably weakened, reflecting a broader trend as traders seek safer havens. This aligns with the desk's view that the market is pricing in increased volatility.

Where it sits in our coverage

Our consensus target for EUR/USD is set at 1.075, with a range from 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)

This view aligns with jpmorgan, which is positioned at the higher end of the range, while bofa expresses a more cautious outlook. The desk's call is consistent with the prevailing sentiment but leans towards a more optimistic scenario compared to the lower bound.

How other firms see it

Firms like jpmorgan and citi share a similar outlook, anticipating a weaker EUR amidst rising geopolitical tensions. In contrast, bofa and hsbc take a more bearish stance, suggesting that the EUR could face further declines.

Watch the EUR/USD trajectory closely, as it may reflect central bank responses to the evolving geopolitical landscape. Additionally, the JPY's performance could provide insights into market sentiment and risk appetite moving forward.