ING Monthly: The world economy at half-time
At a Glance
The desk is positioning for a mildly bullish outlook on the EUR/USD pair, drawn from the recent ING Monthly report's insights on macroeconomic trends and central bank stances. Per the full note, lower oil prices are expected to ease inflationary pressures in the U.S. and Europe, contributing to a steadier economic environment that could support the euro against the dollar. The Federal Reserve's projected hold on rates until mid-2027 contrasts with the potential for the ECB to pursue one more hike if inflation risks linger, suggesting a divergence in monetary policy. Amid these dynamics, the EUR/USD's current spot at 1.1434 reflects a cautious consensus toward the end of the year, with targets ranging from 1.1200 to 1.2000 across major banks.
Key Takeaways
- 01Falling oil prices are projected to relieve inflationary pressures, benefiting the euro.
- 02The Federal Reserve is likely to maintain its current rate until mid-2027, contrasting with potential ECB hikes.
- 03Current EUR/USD consensus targets suggest a range between 1.1200 and 1.2000 for future pricing.
- 04Market sentiment is divided, with forecasts indicating both bearish and bullish perspectives on the euro.
Full Analysis
What the desk is arguing
The desk anticipates that easing inflation pressures from falling oil prices could bolster the euro relative to the dollar in the upcoming months. As noted in the ING Monthly report, lower oil prices may bring relief to consumers and lead the Federal Reserve to maintain rates in an extended period of stability. The ECB's potential for further tightening complicates the landscape, with several market participants eyeing a possible hike in September depending on inflation trends.
Moreover, the report indicates that the expectation for Brent oil prices to average $80/bbl in Q3 and $74/bbl in Q4 reflects a strategic shift that could influence regional currencies. If inflation risks indeed recede, aligning with expectations from both the Fed and ECB, the euro might gather strength against the dollar, providing a more favorable setting for the pair.
Where it sits in our coverage
The current consensus target for EUR/USD is 1.1750 for December 2026, with a range of 1.1200 to 1.2000 as noted across firms. Specific Dec-26 forecasts include: - Citi: 1.1000 - Commerzbank: 1.2200 - UBS: 1.2000
The desk's positioning aligns close to the middle of this range. While some firms like Citi foresee a weaker euro by Dec-26, others such as Commerzbank remain optimistic, which evidences the divided outlook under prevailing economic conditions.
How other firms see it
Firms aligning with the desk’s view, such as HSBC and Nomura, anticipate a robust euro around 1.1700 to 1.2000, suggesting a bullish sentiment driven by external economic factors. However, contrary perspectives from Citi and Commerzbank indicate a more reserved approach, with targets lower than the median.
Additionally, movements in the USD/JPY pair may reflect broader market sentiments around the Fed's interest rate decisions, indicating the significance of cross-market dynamics at play with this thesis.
Market Implications
Traders should monitor the EUR/USD as it hovers around 1.1434, with potential movements influenced by developments in oil prices and central bank statements. Notable focus should be on the ECB's actions later this year.
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
Reports Report ING Monthly: The world economy at half-time Published 11:35 After a volatile first half of the year, will the remainder of 2026 be any calmer? Carsten Brzeski Download PDF Executive summary Our key calls at half-time: Oil prices: The quicker ramp-up in flows throug
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