Morning Bid: Storm brewing
US equities are showing strength with both the S&P 500 and Nasdaq reaching new record highs as the third-quarter earnings season approaches. This bullish sentiment on Wall Street might suggest that traders are increasingly optimistic about corporate profitability and the economic recovery. As stocks rally, it raises the question of how this will influence currency movements, particularly the USD, which remains neutral for now but could see volatility during earnings announcements.
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). Recently, the market's focus on corporate earnings and economic resilience can impact perceptions of the dollar's stability.
How firms align
Goldman maintains a bullish stance on the USD with a target of 1.12, reflecting confidence in the economic outlook. Conversely, BofA's cautious view posits a more bearish range for the dollar at 1.04, indicating a divergence in expected economic data outcomes. See our internal reports for more details.
What the data shows
Given the positive market momentum, focus shifts to upcoming earnings and economic data releases, which could prompt forecast revisions. For further insights, refer to /research/sentiment-shift.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01S&P 500 and Nasdaq new record highs signal market optimism.
- 02Watch for earnings season impact on FX flows.
- 03Potential volatility in USD during earnings releases.
Market implications
Next week, earnings from major corporations could trigger increased volatility in USD pairs. Watch for pivotal earnings reports as a signal for potential fluctuations in the market, especially around the 1.075 mark in EUR/USD.
Risks to this view
A reversal in this bullish sentiment could occur if corporate earnings are significantly below expectations, leading to a sell-off in equities and impacting USD strength negatively.
Sentiment by currency
USD~EUR~JPY~GBP~Composite USD score: +0.00
Sources & References
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Morning Bid: Storm brewing