Review & Preview: Birthday Bull
The fourth birthday of the bull market arrived without much fanfare, leaving investors cautious as they await the upcoming earnings season. With mixed performance in equities and the bond market shuttered for Columbus Day, market participants are holding their breath to see if impending earnings can meet high expectations. This situation adds an element of uncertainty to the FX landscape, as currency fluctuations are likely to mirror stock market sentiments amidst such a wait-and-see approach.
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). The current market sentiment, as highlighted by Barron’s, reflects a neutral outlook across major currencies, suggesting a cautious stance among traders as earnings results approach.
How firms align
JPMorgan shares a somewhat bullish view, aligning with the expectations set forth in the birthday bull discussion, having a target of 1.10, indicating potential upside if earnings impress. Meanwhile, BofA's more bearish stance at 1.04 suggests a divergence in risk appetite, especially considering the broader uncertainty surrounding market performance as observed in the recent mixed stock outcomes.
What the data shows
While there have been no recent forecast revisions that significantly alter the consensus, the upcoming earnings season will likely be the focal point for adjustment. Our internal research underscores this emphasis, indicating that FX pairs will respond closely to equities as outcomes unfold.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Cautious sentiment persists as investors await earnings.
- 02Watch for volatility in FX as equities react to quarterly results.
- 03Key risk level to monitor: consistency in earnings vs. expectations.
- 04Consensus remains neutral, but divergence exists among firm targets.
Market implications
Traders should keep an eye on the upcoming earnings announcements slated for next week, as they will likely drive volatility in currency pairs. The consensus level of 1.075 for EUR/USD could serve as a pivotal point depending on the earnings outcomes.
Risks to this view
A significant miss in earnings expectations would likely invalidate the bullish sentiment projected by firms like JPMorgan, potentially pushing targets down closer to BofA’s 1.04 view. Additionally, any geopolitical tensions could further exacerbate volatility in both stocks and FX markets.
Sentiment by currency
USD~EUR~JPY~GBP~Composite USD score: +0.00
Sources & References
How we cover this story