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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 latest consumer-price index report has intensified scrutiny on the Federal Reserve, highlighting rising bond yields and inflation that leave the central bank facing a complex rate-hike dilemma. The bond market's negative reaction underscores concerns about sustained inflationary pressures, which complicate the Fed's interest rate strategies. This scenario signifies a potential shift in perceived monetary policy credibility, crucial for currency markets as traders reassess their positions amidst a tightening environment.
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). Marketwatch's view suggests increased uncertainty around monetary policy, which aligns with the cautious sentiment reflected in our consensus.
JPMorgan maintains an aligned stance with a target of 1.10, suggesting confidence in moderate economic adjustments. Conversely, BofA's view remains contrary, projecting a target of 1.04, reflecting apprehension over the Fed's ability to manage inflation without derailing growth. These perspectives highlight a diverging outlook among market participants as they react to evolving economic signals.
Recent forecasts indicate an uptick in inflation expectations, necessitating a reassessment of monetary policy courses. As outlined in our research, the recent upward revisions to inflation outlooks support a more hawkish bias. Refer to /research/inflation-outlook for further insight.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
Market implications
Next week’s Federal Open Market Committee meeting will be critical to gauge the Fed's response to inflation. Pay attention to how the market reacts if the EUR/USD approaches our consensus target of 1.075.
Risks to this view
A more dovish shift from the Fed, particularly if inflation shows signs of retreating, could invalidate this bearish outlook on the USD. A sudden economic downturn may push rates lower, impacting the current trajectory.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.65
How we cover this story