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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.
The recent rise in energy prices is amplifying inflationary pressures in the U.S. economy, creating a tricky landscape for both President Trump and the Federal Reserve. With September's Consumer Price Index report set to unveil these heightened pressures, market participants anticipate implications not just for economic policy but for the forthcoming midterm elections as well. The interplay of energy costs and inflation is paramount now, particularly as voters are increasingly sensitive to the economic conditions affecting their day-to-day lives.
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). The headline's focus on inflation aligns with a cautious sentiment in the market, as rising prices influence currency valuations significantly.
JPMorgan is positioned in alignment with the headline’s implications by projecting a target of 1.10, suggesting that they expect these inflation pressures to reinforce a stronger USD. Conversely, BofA presents a contrary view, maintaining a lower target of 1.04, indicating a potential for the dollar to falter despite current inflationary trends.
Recent forecasts have highlighted an increasing wariness among firms regarding inflation's impact on monetary policy, suggesting revisions may be necessary as data becomes available. This continues to be a hot topic within our insights, particularly with respect to the balance of Fed actions and market expectations as noted in /research/inflation-impact-2023.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
Market implications
Investors should monitor the upcoming inflation report closely, particularly at the 1.075 EUR/USD consensus level, as any unexpected outcomes could provoke significant market reactions. The positioning of traders will likely be tied to the sentiment leading up to and following the CPI announcement.
Risks to this view
A reversal in this view could occur if the CPI report comes in lower than expected, signaling that inflation is under control and reducing pressure on the Fed. Additionally, any substantial developments related to energy price stabilization could change the narrative on inflation expectations.
Sentiment by currency
USD+EUR~JPY~GBP~Composite USD score: +0.65
How we cover this story