THINK Ahead: How our 2026 predictions have aged
At a Glance
The desk argues that recent tariff adjustments in the U.S. reflect a broader economic shift towards affordability, as spotlighted by James Smith's latest analysis source. With tariff revenues dropping and consumer price pressures mounting, the potential for a decrease in tariffs appears credible. Current political dynamics could lead to heightened scrutiny around both energy prices and trade measures, impacting FX pairs linked to the U.S. dollar, particularly as we head toward mid-2026.
Key Takeaways
- 01U.S. tariff adjustments signal potential easing inflation pressures.
- 02Gross tariff revenue decline suggests a shift towards consumer affordability.
- 03Current temporary tariffs indicate a strategic approach to mitigate economic impact.
- 04Consensus points to a stable dollar with varying views on tariff implications.
Full Analysis
What the desk is arguing
The desk frames the recent predictions about U.S. tariffs as pivotal for understanding market direction through 2026. Per the full note source, the expectation that tariffs would not only remain stable but actually diminish has begun to manifest, with gross tariff revenue declining and refunds surging following judicial changes to the tariff structure.
Currently, the market dynamics reflect a significant realignment, with temporary 10% tariffs implemented rather than maximum allowable rates, indicating a conscious effort by policymakers to ease consumer pressures. This is a notable shift in light of initial expectations regarding tariff escalation, affirming the desk's view of a decelerating inflation profile in the U.S.
Where it sits in our coverage
Our consensus target for the USD/EUR pair stands at 1.075, with a range between 1.04 and 1.12. Notable targets include: - jpmorgan: 1.10 by March 2026 - bofa: 1.04 by March 2026
The desk’s view aligns closely with jpmorgan, positioning it at the upper bound of our forecast range, suggesting confidence in a more stabilized U.S. trade environment.
How other firms see it
Firms like jpmorgan are aligned with the perspective that easing tariffs could lead to a stronger dollar, while bofa expresses caution, arguing that tariff reductions might be insufficient to counteract underlying inflationary pressures.
Market observers should watch the energy markets closely, as developments in oil prices have historically influenced both trade balances and currency valuations, particularly affecting USD dynamics as the country navigates tariff negotiations.
What the calendar says
There are no high-impact events scheduled in the near term that could directly influence this outlook.
Market Implications
Watch for developments around U.S. tariffs, as any extension or adjustment could significantly influence the USD/EUR pair, especially with our consensus target just above current levels. The interplay of energy market dynamics will also play a critical role in shaping USD strength.
From the original
Opinions Opinion by James Smith THINK Ahead: How our 2026 predictions have aged Published 11:12 James Smith checks in on the predictions we got right at the start of 2026. And the ones that would have been perfect, had there been a bit more oil and a bit less Harry Styles… All th
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