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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 38 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 38 institutional desks. No promotion.
At a Glance
The desk interprets recent commentary from UBS regarding the re-emergence of tariffs proposed by US President Trump, which could impact both inflation perceptions and the affordability crisis in the US consumer market. According to Paul Donovan, the implications of these tariffs may be less severe than previous ones given consumer behavior and pricing pressures surrounding high-frequency purchases. Per the full note , this suggests that while tariffs are politically charged, their inflationary impact could be mitigated by the context of prior tariffs that became embedded in pricing structures. With significant US consumer spending already under pressure, the market will be keenly watching reactions in inflation metrics and overall consumer sentiment as this situation develops.
Key Takeaways
Full Analysis
The desk posits that the newly proposed tariffs by Trump, while potentially politically damaging, may have a diminished impact on inflation compared to past tariffs. As noted by UBS, exemptions on certain essential goods indicate awareness of current consumer inflation psychology, suggesting that the administration aims to alleviate some direct cost burdens on consumers.
Furthermore, Donovan articulates an important understanding that once passed on, tariffs often stick to pricing streams regardless of their subsequent legality. This historical context implies that if new tariffs are levied on goods already subject to previous illegal tariffs, the net inflationary effect might be less impactful since prior tariff-related price increases are already factored into current consumer pricing.
The consensus target for the USD/EUR pair currently sits at 1.075, with a range from 1.04 to 1.12. Notably, the following firms have set their respective forecasts: - jpmorgan: 1.10 for Mar26 - bofa: 1.04 for Mar26
This perspective aligns with jpmorgan's position at the higher end of the range, indicating a bullish sentiment on USD strength, contrasting with bofa's more cautious stance at the lower end.
Aligned firms, including jpmorgan, portray a confident outlook on the US dollar's resilience amid anticipated tariff impacts. Conversely, bofa has adopted a more bearish view, suggesting room for downside in USD valuations.
Moving forward, it's essential to monitor how these tariff discussions influence broader metrics like inflation rates and consumer spending behaviors, especially in relation to the USD/EUR dynamic.
Market Implications
Traders should monitor the 1.075 level closely as a pivot point for further USD strength or weakness, especially as consumer inflation data for June becomes available in a few weeks. Positioning adjustments may be necessary ahead of any detailed announcements on tariff exemptions and their market reception.
From the original
US President Trump is proposing new tariffs—an additional 10% for US consumers of goods from most major economies. Someone in the administration seems to be aware that tariffing high frequency purchases aggravates inflation perceptions and the affordability crisis, and some key f
Per the full note [source], UBS Chief Economist Paul Donovan downplays the near-term market impact of Trump's proposed pharma tariffs, arguing that the delayed 2027–2029 implementation and likely legal challenges reduce the probability-weight markets assign to them. Donovan's main focus is on the expiration of interim 10% tariffs this Friday, which he sees as limited in inflation impact since most pass-through was already absorbed via the unlawful tariff regime. The desk signals that USD direction remains driven more by the affordability crisis and general trade policy noise rather than this specific headline, with no overt currency call.
Lead — The desk emphasizes the potential implications of the 15% tariff proposed by the U.S. administration on importers, noted by Treasury Secretary Besant, and how this impacts inflation perceptions in a U.S. context. According to the analysis, while this tariff may not substantially raise inflation, it influences affordability narratives across households. Per the full note from UBS, this evolving tariff landscape aligns with existing market expectations and financial models, suggesting traders should be poised for further fluctuations in related currency pairs.
The desk believes that recent tax threats from President Trump could escalate inflationary pressures in the U.S. economy, particularly impacting consumer perception. Per the full note from UBS, while these proposed taxes focus on less frequently purchased goods like cars and pharmaceuticals, they could create indirect inflation effects that will resonate through the market. Ultimately, how consumers perceive inflation will be crucial, especially if visible inflation through high-frequency purchases begins to rise. This could complicate the political landscape for further tax increases and consumer pricing strategies.
The current U.S. affordability crisis is under intense scrutiny, as President Trump threatens to double tariffs on Canadian car imports, though this move is largely seen as political posturing with a delayed implementation date until January 2027. Per the full note from UBS, this signals a pattern of transient threats rather than substantive action, as market participants remain unconvinced of any detrimental fallout. Meanwhile, U.S. Treasury Secretary Besant has raised alarm over Iran sanctions lacking clarity and is seemingly hesitant to confront China, the primary importer of Iranian oil, which complicates the economic landscape further. As market sentiment remains mixed, particularly with regard to inflationary pressures, key data points, particularly those from the German IFO Business Survey, could provide additional insights into European economic sentiments amidst these broader trade tensions.
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