Macro Freestyle: Trade wars, currencies and central banks

What the desk is arguing

The desk argues that the US dollar is likely to weaken amid escalating trade tensions and evolving central bank policies. Per the full note, Standard Chartered's analysis indicates that inflationary pressures could lead to a recalibration of monetary policy, particularly in the US and emerging markets.

Supporting this view, the commentary notes that the dollar index is sensitive to shifts in global trade flows, with the potential for increased volatility as central banks navigate these challenges. For instance, if inflation continues to rise, the Fed may be compelled to adopt a more hawkish stance, impacting dollar dynamics.

Where it sits in our coverage

Our consensus target for the USD is 1.075, with a range of 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)

This view aligns closely with jpmorgan, which anticipates a stronger dollar, while diverging from bofa, which holds a more bearish outlook. The desk's call is positioned at the upper end of the consensus range, suggesting a cautious optimism about the dollar's resilience.

How other firms see it

Firms like jpmorgan and citi are aligned with the desk's perspective, anticipating that the dollar will face headwinds due to trade uncertainties and inflationary pressures. Conversely, bofa and deutsche maintain a contrary stance, expecting further dollar weakness as trade tensions escalate.

Key currency pairs to monitor include EUR/USD and USD/JPY, as their trajectories will be influenced by central bank actions and trade developments. The outlook for the Fed's policy adjustments will also play a significant role in shaping these dynamics.

What the calendar says

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