See What 71 Economists Told Us About Where Growth and Yields Are Headed
The latest Wall Street Journal survey reveals economists are pivoting toward a future characterized by elevated bond yields and robust growth, indicating expectations for a prolonged period of firmer economic conditions. This shift places downward pressure on the likelihood of immediate policy pivots from central banks, aligning with the bullish sentiment surrounding the USD. As markets anticipate sustained yield increases, the attractiveness of USD carry trades and duration shorts gains further support, making this an essential moment to gauge currency movements and interest rate impacts.
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 prevailing view aligns closer to the upper limit as JPMorgan and ING express similar bullish sentiments regarding the USD's strength against the euro.
How firms align
JPMorgan's forecast of 1.10 supports the front-facing projection implied by the survey, positioning them in line with the broader expectations of sustained higher yields. Conversely, BofA holds a more bearish target of 1.04, suggesting a divergence in outlooks as the market recalibrates its assessments based on economic momentum and yield trajectories.
What the data shows
With this consensus indicating a solid growth outlook, the anticipated inflation relief may further solidify the argument for maintaining high yield positions. This perspective corresponds with insights that suggest interest rates will remain elevated longer than previously expected, shaping trading strategies moving forward.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Economists are now forecasting higher yields to persist, shifting market dynamics.
- 02Expect sustained USD strength as carry and duration shorts gain traction.
- 03Market attention should focus on bond yield movements and upcoming economic data releases.
Market implications
Watch for USD strength against the EUR, particularly with the consensus target of 1.075 in play. The announcement of key economic indicators in the coming weeks could further influence currency valuations and yield expectations.
Risks to this view
A significant reversal in inflation trends or unexpected dovish signals from central banks could invalidate the current bullish view on the USD, pointing to a need for reevaluation of short positioning and yield forecasts.
Sentiment by currency
USD+EUR~JPY GBP~Composite USD score: +0.65
Sources & References
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