Rates Spark: Data for the EUR belly
At a Glance
The Desk sees room for EUR belly curve recovery pending upcoming data, particularly the flash PMIs and ECB’s consumer inflation expectations survey slated for this Friday. Per the full note from ing-think, while long-end US yields have fluctuated significantly, European yields have experienced less volatility, stabilizing just above the 3.25% mark. Current market sentiment shows limited expectations for forward rate cuts, yet a significant downside surprise in eurozone PMIs could prompt a recalibration around ECB rate hike expectations. This presents an opportunity to adjust positions as consensus forecasts suggest the EUR belly has potential for upward movement amidst current economic conditions.
Key Takeaways
- 01Upcoming PMIs and inflation expectations could influence ECB rate hike sentiment.
- 02Recent stability in Bund yields contrasts with volatility in US Treasuries.
- 03Cross-firm consensus shows bullish sentiment for EUR/USD through 2026.
- 04Market focus is shifting towards eurozone data releases for further insights.
Full Analysis
What the desk is arguing
The Desk is asserting that upcoming macroeconomic data could provide support for the EUR belly curve amid a stabilizing yield environment. According to ing-think, any downside surprises related to the eurozone PMIs might trigger a recovery in EUR yields, particularly as the market is already pricing in ECB rate hikes.
The current yields for 10-year Bunds have shown minimal deviation, remaining above 3.25% despite substantial movements in US Treasuries. This suggests that market participants are awaiting impactful data to determine the next steps in their positioning, particularly as expectations for rate adjustments by the ECB remain firm.
Where it sits in our coverage
Current consensus targets for EUR/USD are positioned at a median of 1.1700 for March 2026, ranging from 1.1200 to 1.2000. Key firms contributing to this forecast include: - rabobank: Mar26 at 1.1759, Dec26 at 1.1400 - commerzbank: Mar26 at 1.1900, Dec26 at 1.2200 - ubs: Mar26 at 1.2000, Dec26 at 1.2000
The Desk's position aligns closely with other firms, particularly rabobank and commerzbank, who are leaning towards a bullish outlook for EUR/USD through 2026.
How other firms see it
Firms poised like morganstanley and goldman maintain a bullish stance with targets above the current market levels, while others like hsbc and anz present a more conservative outlook for the EUR going into 2026.
The direction of the EUR/USD is closely tied to both the ECB rate path and developments in the GBP/USD given the underlying economic conditions in the Eurozone and UK. Therefore, traders should keep an eye on the flow of eurozone data as it adjusts market expectations.
What the calendar says
With no high-impact events scheduled in the next 30 days, Friday’s release of the PMIs stands out as a pivotal moment for market positioning leading into the subsequent weeks.
Market Implications
Watch for any volatility in the EUR belly curve aligned with PMIs on Friday. Currently, the level rests around 1.1700, which could be impacted by the consumer inflation expectations survey. Adjustments in positioning may emerge based on data prints that deviate from expectations.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bearish | 1.1140 |
ABN AMRO | Bullish | 1.1500 |
Bank of America | Bullish | 1.1500 |
From the original
Articles Rates Spark: Data for the EUR belly Published 16:44 Rates Spark Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The latest volatility in long-end US yields has left the EUR side largely unimpressed. But we look to Friday's data, not so much t
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