June 2025 FOMC Preview Podcast Edition - It’s never “too late” to pivot (so long as it’s to the dovish side)

What the desk is arguing

The consensus view is that the Fed is moving toward a dovish pivot, primarily in response to weakening economic fundamentals and softer inflation data. This could signal an imminent easing of monetary policy, allowing the Fed to maintain a more supportive stance in the face of economic challenges.

Supporting evidence comes from the mixed jobs reports and the consistent downtrend in inflation metrics, indicating that the central bank may indeed be falling behind the curve. In turn, this creates an environment where policymakers may become increasingly inclined to adjust their strategy to foster economic growth. The counterfactual that the desk is implicitly rejecting is the notion that the Fed will continue on its current path without accommodating these troubling economic signals.

Where it sits in our coverage

Our consensus target for the USD pairs remains at 1.075, characterized by a firm spread reflective of current market conditions. This dovish pivot aligns with our analysis, predicting potential volatility around the June FOMC meeting as traders adjust their positions in anticipation of shifting monetary policy.

Notable targets published by major firms include:

• JPMorgan: Target of 1.10 for Mar-26
• Barclays: Target of 1.08 for Mar-26
• Goldman Sachs: Target of 1.09 for Mar-26

How other firms see it

Some firms appear to resonate with this dovish outlook, with Morgan Stanley and HSBC echoing concerns about the Fed's current trajectory amidst economic turbulence. This perspective aligns with MUFG's view of potential policy easing.

However, other firms, like BofA, hold a contrary position, suggesting that the Fed may prioritize inflation control over immediate economic considerations, advocating for maintaining a tighter stance for the foreseeable future. The divergence in opinions highlights the critical debate within market circles regarding the Fed's next steps.