FX Daily: War is over – maybe
At a Glance
The desk posits that the potential US-Iran peace deal could impact the dollar negatively amidst a backdrop of softening oil prices. Following President Trump's declaration of a ceasefire, markets exhibited typical optimistic responses, with Brent crude down 4% and the dollar retreating by 0.8% as short-dated US yields fell 10bps. Per the full note from ING, while progress appears to be on the horizon, the lack of Iranian confirmation and the historically volatile nature of such announcements pose significant uncertainty amidst a market eager for stable oil supplies and reduced inflation pressures.
Key Takeaways
- 01Potential US-Iran peace deal could pressure the dollar further amidst falling oil prices.
- 02Markets show initial optimism but lack confirmation from Iranian authorities.
- 03Current consensus for EUR/USD is 1.1550, with targets ranging up to 1.2200.
- 04Diverging forecasts among major banks indicate uncertainty in the USD's trajectory.
Full Analysis
What the desk is arguing
The desk suggests that recent developments regarding US-Iran relations and the possibility of a peace agreement may lead to further weakening of the dollar. Market reactions to these developments have been pronounced, with a notable decline in oil prices, indicating traders' expectations for peace and subsequent recovery in oil supply.
Despite initial optimism, concerns linger about the lack of concrete commitments from Iran, as they have not officially validated any agreement text. This lack of confirmation indicates that any recovery in energy supply—and by extension, a stabilization of associated inflationary pressures—remains tentative.
Where it sits in our coverage
Our current consensus target for EUR/USD stands at 1.1550, with a range from 1.1200 to 1.2000 through December 2026. Notable projections from firms include bofa at 1.2200, mizuho at 1.1700, and citi targeting 1.1200, suggesting a range of perspectives on the euro's trajectory against the dollar.
This view lands towards the lower end of the spectrum but is still within the wider consensus, indicating a divergent outlook compared to some bullish forecasts while aligning with those projecting a more subdued euro over the next few years.
How other firms see it
Aligned firms such as bofa and barclays seem optimistic about the EUR/USD outlook, citing targets around 1.2200 and 1.2100 respectively. In contrast, firms like citi and anz are more conservative, with targets significantly lower, suggesting a divided sentiment in the market regarding the euro's strength in light of geopolitical volatility.
With attention on the EUR/USD pair, market participants should also monitor developments in US inflation indicators and central bank communications, which will likely interlink with any outcomes from the ongoing US-Iran negotiations.
Market Implications
Traders should closely monitor developments in the US-Iran peace talks and how they impact oil supply scenarios. A confirmed deal could trigger a shift in dollar positioning, particularly if energy prices remain subdued or decline further.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Bank of America | Bearish | 1.1200 |
ANZ | Bearish | 1.1400 |
UOB | Bullish | 1.1565 |
From the original
Articles FX Daily: War is over – maybe 08:02 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download “We ended the war with Iran today,” said President Trump yesterday evening. Brent crude fell 4% on the news, while short-dated US yields and the dollar fel
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4 itemsThe Commodities Feed: Oil drops as hopes for Persian Gulf resolution grow
The desk observes a significant downturn in oil prices, fueled by renewed optimism regarding a potential agreement between the US and Iran. Per the full note from ING, this development could reshape the energy market landscape, impacting currency valuations related to oil-dependent economies. As oil prices declined sharply, traders are reassessing positions, anticipating that a successful diplomatic resolution might alleviate geopolitical tensions and lead to increased supply. With no immediate high-impact economic events on the calendar, market focus remains solely on geopolitical developments for directionality.
FX Daily: Remarkable resilience of risk assets
The desk interprets the recent uptick in risk asset purchases and dollar selling as a response to perceived progress in US-Iran negotiations, indicating a shift in investor sentiment. Per the full note [source], this development contrasts sharply with earlier fears of a potential oil market tipping point that could lead to a significant spike in crude prices. With no major economic events on the horizon, the focus remains on how these geopolitical dynamics will influence currency movements, particularly the USD's potential downside. The consensus among firms suggests a cautious outlook, with targets reflecting a range of expectations for the USD's trajectory.