Olli Rehn: Geopolitical turmoil and the eurozone
At a Glance
The desk believes that geopolitical tensions are likely to exert upward pressure on the euro, as articulated by Olli Rehn, Governor of the Bank of Finland, who highlighted the eurozone's resilience amid external shocks. Per the full note source, Rehn emphasized that the eurozone's economic fundamentals remain robust, suggesting that the euro could strengthen against the dollar as investors seek safe-haven assets. Current positioning reflects a market that is cautiously optimistic, with a consensus target for EUR/USD at 1.075, indicating a potential for appreciation in the near term.
Full Analysis
What the desk is arguing
The desk posits that the ongoing geopolitical turmoil will bolster the euro, driven by a flight to safety among investors. Olli Rehn's remarks underscore the eurozone's economic stability, which could attract capital inflows and support the euro's value. Per the full note source, he noted that the eurozone's economic resilience is a key factor in navigating these turbulent times.
Supporting this view, recent data indicates that eurozone inflation remains above the ECB's target, with the latest figures showing a year-on-year increase of 3.5%. This persistent inflation could compel the European Central Bank to maintain a hawkish stance, further supporting the euro against the dollar.
The alternative read would be that if geopolitical tensions were to de-escalate significantly, the euro might face downward pressure as risk appetite returns to the market, potentially leading to a shift in capital flows away from the eurozone.
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 supports a stronger euro, while bofa presents a more cautious outlook, sitting at the lower end of the consensus range. The desk's call is at the upper bound of the spread, reflecting a bullish sentiment on the euro.
How other firms see it
Firms aligned with this bullish perspective include jpmorgan and citi, both projecting a stronger euro in their forecasts. Conversely, bofa holds a contrary view, anticipating a weaker euro due to potential economic headwinds.
Key currency pairs to watch include EUR/USD, which is directly influenced by ECB policy, and EUR/JPY, which may reflect broader risk sentiment in the market. Additionally, monitoring the ECB's interest rate decisions will be crucial as they impact the euro's trajectory.
What the calendar says
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What changed vs prior statement
- 01• First indexed statement for this feed — no prior to diff against.
From the original
Speech by Mr Olli Rehn, Governor of the Bank of Finland, at the Washington Economic Festival "Global macro sessions", organised by Reinventing Bretton Woods Committee, Washington DC, 16 April 2026.
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Martin Kocher: Why our changing world needs a strong euro
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The desk posits that the ongoing war-related supply shocks are complicating monetary policy decisions, particularly for the Sveriges Riksbank. Per the full note [source], Governor Erik Thedéen highlighted the difficulties central banks face in navigating inflationary pressures exacerbated by geopolitical tensions. This aligns with our view that the Riksbank may need to adopt a more cautious approach to interest rate adjustments, especially as inflation remains stubbornly high. With consensus targets for EUR/SEK reflecting a range of 1.04 to 1.10, the market is keenly watching for any shifts in policy direction that could impact currency valuations.
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