Global Rates: Analyzing Eurex and US futures roll

What the desk is arguing

The desk believes that the upcoming bond futures rollover will create volatility in the EUR/USD pair, particularly as market participants reassess their positions in light of interest rate changes. Per the full note, Gupta and Ozil emphasize that the interplay between US and Eurex futures will be crucial in shaping market sentiment leading into the rollover period.

The current spot price of 1.1500 is 4% below the Dec26 consensus target of 1.2000, suggesting that the market may be underpricing the euro relative to the anticipated interest rate trajectory. This discrepancy could lead to a correction as traders realign their expectations with the broader market outlook.

Where it sits in our coverage

Our consensus target for EUR/USD is 1.2000 for Dec26, with a range from 1.1300 to 1.2500. Notable firm targets include: - jpmorgan: 1.2000 - goldman: 1.2500 - deutschebank: 1.2500

This view aligns with the broader consensus, as most firms are forecasting a strengthening euro, with goldman and deutschebank sitting at the upper end of the range. The desk's position is consistent with the prevailing market sentiment, suggesting a potential upside for the euro as we approach the rollover.

How other firms see it

Firms such as jpmorgan, goldman, and deutschebank are aligned in their bullish outlook for the euro, all targeting levels above the current spot price. Conversely, citi and bofa hold a more cautious stance, projecting lower targets for the euro, with citi forecasting 1.1300 for Mar26.

The EUR/USD trajectory is closely tied to the Federal Reserve's interest rate decisions and the ECB's policy stance, making these central banks critical to watch in the coming weeks. Additionally, fluctuations in US Treasury yields will likely influence the euro's performance as traders react to changes in the interest rate environment.