Macro Freestyle: What to watch as we enter H2
At a Glance
As we transition into the second half of the year, the desk emphasizes the critical impact of geopolitical tensions, oil price fluctuations, and upcoming tariff deadlines on FX markets. Per the full note from Standard Chartered, these factors are expected to shape market dynamics significantly, particularly in the context of Fed policy and inflation expectations. The consensus target for EUR/USD sits at 1.075, with a range between 1.04 and 1.12, indicating a cautious outlook amidst these uncertainties.
Key Takeaways
- 01Geopolitical tensions and oil price volatility are critical factors for FX markets in H2 2025.
- 02The upcoming tariff deadlines could exacerbate market volatility.
- 03Fed policy and inflation expectations will significantly influence currency valuations.
- 04Consensus target for EUR/USD is 1.075, with a range of 1.04 to 1.12.
Full Analysis
What the desk is arguing
The desk posits that geopolitical uncertainty and oil price volatility will play pivotal roles in shaping FX market movements in H2 2025. Per the full note from Standard Chartered, the upcoming tariff deadlines could exacerbate these tensions, leading to increased market volatility.
Furthermore, the Federal Reserve's policy stance remains a crucial factor, especially as inflation continues to be a concern. The desk highlights that any shifts in Fed policy could significantly impact currency valuations, particularly for the USD.
Where it sits in our coverage
Our consensus target for EUR/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) - citi: 1.08 (Mar26)
This view aligns with jpmorgan, which is positioned at the upper end of the range, while bofa presents a more conservative outlook at the lower end. The desk's call reflects a balanced perspective amid prevailing uncertainties.
How other firms see it
Several firms, including jpmorgan and citi, share a similar outlook, emphasizing the importance of geopolitical factors and Fed policy on currency movements. Conversely, bofa maintains a more cautious stance, reflecting concerns over potential economic slowdowns.
Key currency pairs to watch include EUR/USD, which is closely tied to ECB policy decisions, and USD/JPY, as shifts in Fed policy could have significant spillover effects on the Japanese yen.
What the calendar says
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Market Implications
Traders should monitor the EUR/USD level closely, particularly as it approaches the consensus target of 1.075. Additionally, any announcements related to tariffs or Fed policy could serve as catalysts for significant market movements.
From the original
Standard Chartered’s Eric Robertsen, Global Head of Research and Chief Strategist and Madhur Jha, Head of Thematic Research examine financial markets at the midpoint of the year, including the impact of the upcoming tariff deadline, geopolitical uncertainty, oil price volatility,
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The desk highlights increasing risks to financial-market resilience, driven by geopolitical tensions and fiscal uncertainties, as articulated by Standard Chartered's recent commentary. Per the full note, the recent IEEPA tariff ruling could exacerbate market volatility, particularly in commodities and JGBs, while concerns about AI-driven market optimism may lead to a recalibration of investor sentiment. With a consensus target of 1.075 for USD/JPY, traders should remain vigilant as these factors unfold, especially with potential implications for central bank policies.
Macro Freestyle – The changing global outlook
The desk argues that the ongoing geopolitical tensions, particularly the Middle East conflict, are creating significant discrepancies between market expectations and macroeconomic realities, particularly regarding growth and inflation. Per the full note [source], Standard Chartered highlights that while markets are fixated on inflationary pressures, they are underestimating the potential for demand destruction across various economies. This misalignment could lead to a recalibration of central bank policies, particularly as inflation persists longer than anticipated, impacting discretionary spending and investment decisions.