U.S. inflation is already bad enough. It might get worse.
Recent commentary on U.S. inflation suggests a troubling trajectory, with the potential for worsening conditions in the near term. Federal Reserve Chairman Kevin Warsh's remarks imply the central bank's resolve to combat inflation will be steadfast, although achieving stability may prove arduous. This sentiment raises concerns about the broader implications for the USD as markets brace for prolonged inflationary pressures, casting uncertainty on future monetary policy moves.
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). Marketwatch's framing reflects a heightened concern about inflation, which aligns closely with JPMorgan's more aggressive target of 1.10 for March 2026.
How firms align
JPMorgan recently positioned itself in the aligned category with a target of 1.10, suggesting a belief in inflationary challenges impacting the euro. On the contrary, BofA's stance with a target of 1.04 indicates a more cautious outlook. For specifics, see our internal coverage on /reports/jpmorgan and /reports/bofa.
What the data shows
Recent revisions from various firms suggest that inflation forecasts are becoming increasingly entrenched, leading to potential adjustments in USD and EUR dynamics. For in-depth discussion, refer to our related research at /research/inflationoutlook.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01U.S. inflation remains a critical focus, with risks to the economic outlook.
- 02Traders should prepare for volatility as inflation expectations fluctuate.
- 03Watch for Fed policy shifts; levels on EUR/USD could vary towards 1.10.
- 04Longer-term positioning should consider the risk of sustained price pressures.
Market implications
Markets should monitor upcoming inflation data releases, particularly next month's CPI report, to gauge sentiment shifts. The consensus number at 1.075 for EUR/USD may serve as a pivot point for traders reacting to Fed communications.
Risks to this view
If inflation appears to subside more rapidly than anticipated, this could shift market sentiment markedly. A significant miss in inflation data could force the Fed to reevaluate its tightening stance, leading to a recalibration of USD positions.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.65
Sources & References
How we cover this story