Global Rates: Analysing Eurex and US futures roll
At a Glance
The desk anticipates a bullish trend for EUR/USD as the Mar26 and Jun26 rollover periods approach, driven by the dynamics of US and Eurex futures. Per the full note from J.P. Morgan, the discussion highlights the implications of these rollovers on market positioning and interest rate expectations. Current consensus targets for EUR/USD are notably higher than the current spot, indicating a potential upward adjustment. With the market currently trading at 1.1500, the consensus for Mar26 is 1.1750, suggesting a significant upside potential as traders adjust their positions ahead of the rollover events.
Key Takeaways
- 01The desk expects upward pressure on EUR/USD due to upcoming bond futures rollovers.
- 02Current spot price of 1.1500 is significantly below the Mar26 consensus target of 1.1750.
- 03Major firms like J.P. Morgan and Goldman Sachs align with a bullish outlook for the euro.
- 04Divergence exists among firms, with some holding more cautious targets for EUR/USD.
Full Analysis
What the desk is arguing
The desk's thesis is that the upcoming Mar26 and Jun26 bond futures rollover will create upward pressure on EUR/USD. This expectation is rooted in the analysis provided by J.P. Morgan, which underscores the influence of futures roll dynamics on market sentiment and positioning.
Supporting this view, the current spot price of 1.1500 is well below the consensus target of 1.1750 for Mar26, indicating that traders may be underestimating the potential for appreciation in the euro as the rollover approaches. The desk notes that the positioning shifts observed in both US and European markets could further bolster this bullish outlook.
Where it sits in our coverage
Our consensus target for EUR/USD stands at 1.1750 for Mar26, with a range between 1.1300 and 1.2000. Notable targets from other firms include: - jpmorgan: Mar26 1.1800 - goldman: Mar26 1.1800 - ing: Mar26 1.1900
This view aligns closely with the broader cross-firm consensus, particularly with jpmorgan and goldman, both targeting 1.1800 for Mar26, suggesting a strong alignment among major players in the market. The desk's call is positioned at the higher end of the consensus range, reflecting a more optimistic outlook on the euro's performance.
How other firms see it
Firms such as jpmorgan, goldman, and ing are aligned with the desk's bullish stance on EUR/USD, all forecasting targets above the current spot price. Conversely, citi and bofa present a more cautious outlook, with targets at 1.1300 and 1.1700 respectively for Mar26, indicating a divergence in expectations.
The trajectory of EUR/USD is closely tied to the actions of the ECB and the Fed, particularly as market participants assess the implications of interest rate decisions on both sides of the Atlantic. The interplay between these central banks will be critical in shaping future movements in the currency pair.
Market Implications
Traders should monitor the EUR/USD level closely as it approaches the Mar26 target of 1.1750. The positioning shifts in response to the futures rollover could signal a strong move, particularly if the market sentiment turns bullish ahead of the event.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2027 |
|---|---|---|
Goldman Sachs | Bearish | 1.1200 |
UOB | Neutral | 1.1450 |
Citi | Bearish | 1.1000 |
From the original
In this podcast Khagendra Gupta and Ipek Ozil discuss the drivers of US and Eurex futures roll and their outlook for Mar26/Jun26 bond futures rollover. Speakers: Ipek Ozil - Head of US Interest Rate Derivatives Strategy Khagendra Gupta - Head of European Interest Rate Derivatives
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