Brussels looks to capture Big Tech through tax on large corporations, FT reports
The EU is exploring a corporate tax on large US tech companies, aiming to bolster revenues while managing potential fallout from the Trump administration. This move is reshaping the geopolitical landscape, with implications for trade negotiations and regulatory dynamics. As Brussels places emphasis on taxing major players in the tech landscape, it’s a pivotal moment for both European fiscal policy and US-EU relations, signaling possible shifts in investment and currency flows in the region.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). This proposed tax could exert pressure on USD in response to EU fiscal policy shifts, aligning with our bearish outlook on the currency.
How firms align
JPMorgan's outlook, with a target of 1.10, supports the expectation of the euro appreciating against the dollar in light of increased EU revenue strategies. In contrast, BofA's lower target of 1.04 suggests skepticism regarding the euro's ability to strengthen amid geopolitical tensions. Detailed analyses can be found in our internal reports on each firm.
What the data shows
Recent forecasts show a divergence in views, with some firms projecting a weaker dollar if EU tax measures lead to positive economic sentiment. Insights into broader market reactions to the taxation proposal are available in /research/euro-tax-reaction.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Potential EU tax on US tech could weaken USD outlook.
- 02Watch for market responses as the proposal unfolds.
- 03Catalyst: EU fiscal policy shifts and trade negotiations.
- 04Evaluate potential for increased euro strength against the USD.
Market implications
Monitor the EUR/USD pair closely, especially as sentiment shifts following Tuesday’s announcement. A level around 1.08 could serve as a key support area while our consensus target of 1.075 remains in focus.
Risks to this view
Should the Biden administration respond aggressively to EU tax initiatives, or further economic data indicate US strength, the current bullish stance on EUR could be overturned, leading to a possible reversal beneath 1.05 in EUR/USD.
Sentiment by currency
USD+EUR JPY~GBP~Composite USD score: +0.60
Sources & References
How we cover this story