Wall Street's fear gauge surges the most since April. Why traders think it should be even higher
Recent turbulence in the markets has resulted in a notable spike in the VIX, which surged over 11 points on Thursday, marking the most significant volatility shift since April. This uptick is indicative of heightened investor anxiety around market conditions and is prompting a risk-off approach among traders. The increase in the VIX suggests that traders may anticipate further financial instability, which historically supports the USD and JPY as safe-haven currencies amid market uncertainty.
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). This positioning reflects a cautious sentiment among market participants as illustrated by the recent market movements.
How firms align
Goldman Sachs aligns with the notion of USD strength and anticipates volatility may skew towards a more bearish stance for the EUR, targeting 1.12 for Q1 2026. Conversely, BofA's more conservative position at 1.04 suggests they anticipate a stronger euro performance against the dollar despite recent jitters. Both stances are examined in our internal reports from /reports/goldman and /reports/bofa.
What the data shows
Recent adjustments in forecasts highlight a tendency towards heightened volatility forecasts, which may lead to further revisions down the line. Refer to /research/market-volatility for insights into these dynamics.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01VIX hitting highest level since April underscores rising market uncertainty.
- 02Traders are reallocating towards safe havens like USD and JPY.
- 03Expect further volatility; watch for USD strength near recent highs.
- 04Risk sentiment suggests a cautious trading environment ahead.
Market implications
A downward shift could see EUR/USD testing the 1.04 support level if volatility persists. Market players should also prepare for upcoming economic data releases which could further affect positioning strategies.
Risks to this view
A recovery in global markets or positive economic indicators such as robust labor reports could invalidate the prevailing risk-off sentiment, prompting a sell-off in safe-haven currencies and a shift back towards riskier assets.
Sentiment by currency
USD+EUR JPY+GBPComposite USD score: +0.65
Sources & References
How we cover this story