Global Rates: Analyzing Eurex and US futures roll
At a Glance
The desk anticipates a significant impact from the upcoming Dec25/Mar26 bond futures rollover, as discussed by J.P. Morgan's Khagendra Gupta and Ipek Ozil in their recent podcast. They highlight that the dynamics of US and Eurex futures rolls will be influenced by current interest rate expectations and market positioning. Per the full note, the current EUR/USD spot is trading at 1.1500, which is notably below the consensus target of 1.2000 for Dec26, indicating potential undervaluation against market forecasts. This divergence could present trading opportunities as the market adjusts to the evolving interest rate landscape.
Key Takeaways
- 01The desk expects volatility in EUR/USD due to the Dec25/Mar26 bond futures rollover.
- 02Current EUR/USD spot at 1.1500 is significantly below the Dec26 consensus target of 1.2000.
- 03Market positioning may shift as traders reassess interest rate expectations.
- 04Key firms are aligned in their bullish outlook for the euro, with targets above current levels.
Full Analysis
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.
Market Implications
Traders should monitor the EUR/USD pair closely as it approaches the Dec26 target of 1.2000. The upcoming bond futures rollover could catalyze significant price movements, particularly if market sentiment shifts in response to interest rate announcements.
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 Dec25/Mar26 bond futures rollover. Speakers: Ipek Ozil, Head of US Interest Rate Derivatives Strategy Khagendra Gupta, Head of European Interest Rate Derivatives S
Related speeches
4 itemsGlobal Rates: Analysing Eurex and US futures roll
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.
US Rates - I won’t see you next time
The desk anticipates a continued upward bias in Treasury yields, driven by a shift in Fed sentiment and geopolitical tensions. Per the full note from J.P. Morgan, the recent FOMC meeting revealed a split among committee members, indicating a potential pivot towards rate hikes rather than cuts, with a growing consensus on inflation concerns. This shift has been reflected in the market, where the implied distribution for future rate moves has notably changed, suggesting a more balanced outlook between hikes and cuts. The upcoming Treasury Quarterly Refunding Announcement on May 6 could further influence market dynamics, particularly in the context of rising fiscal deficits and changing supply conditions.