Carsten: The global economy at half time
The desk assesses that a potential turnaround for the global economy could encourage currency strength, especially in EUR/USD and USD/JPY. Per the full note source, Carsten Brzeski suggests a chance for a respectable second-half performance despite challenges. Current EUR/USD trades at 1.1434, while USD/JPY shows an even sharper dynamic at 161.6930, indicating trader positioning could shift amid changing expectations. The prevailing sentiment stands against the backdrop of a lack of immediate high-impact events, suggesting a quieter market ahead.
What the desk is arguing
The desk argues that a shift in global economic momentum could support potential rallies in key currency pairs, notably EUR/USD and USD/JPY. Per the full note source, Brzeski reflects on the global economy's precarious position entering the second half of the year, likening it to a sports match where momentum can swing unexpectedly.
Data from our internal forecasts shows consensus expectation on EUR/USD ranging from 1.1200 to 1.2000, with a median target of 1.1700 by March 2026. This reflects a bullish outlook compared to USD/JPY consensus expectations, which are notably lower, citing a median target at 155.0000 for March 2026.
The alternative read would suggest a significant setback in global economic conditions could prevent any upward movement in these pairs, a concern that traders should remain aware of as they review longer-term positions.
Where it sits in our coverage
For EUR/USD, the current spot price of 1.1434 is within a consensus target range of 1.1200 to 1.2000, with specific firm targets like commerzbank predicting 1.1900 by March 2026 and ub anticipating a 1.2000 level. In comparison, USD/JPY's spot at 161.6930 is significantly higher than its consensus target range of 149.0 to 161.7145, with commerzbank and scotiabank projecting targets of 149.0 and 154.4225 for March 2026.
The desk's outlook on EUR/USD aligns closely with consensus while being at the median point, suggesting traders are optimistic about a potential euro appreciation against the dollar in the medium term.
How other firms see it
Aligned firms like goldman and hsbc both have EUR/USD targets set around 1.1800 for March 2026, sharing a bullish sentiment on the pair. In contrast, firms like citi anticipate a more conservative 1.1300 target for the same period, suggesting a disparity in confidence levels regarding the euro's potential.
The EUR/USD trajectory mirrors trends in ECB monetary policy adjustments, while USD/JPY's future direction will likely be influenced by BoJ rate decisions, which could have a significant spillover effect.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01The desk anticipates a potential upside for EUR/USD in H2 2023.
- 02Denoting significant divergence in consensus expectations for USD/JPY.
- 03Global economic changes could shift momentum dynamics in FX markets.
- 04Positional adjustments may be necessary in the absence of immediate high-impact economic events.
Market implications
Market participants should watch the 1.1500 level in EUR/USD as a psychological threshold, with the potential for buyers if momentum improves. Additionally, shifts in BoJ or ECB policy could catalyze movement in USD/JPY trading, making these events critical for positioning.
Risks to this view
The primary risk to this outlook would arise from significant geopolitical developments or economic data that indicate a sharper downturn than expected, which could undermine trader confidence and push currencies like the euro and yen lower. A further deterioration in global trade relations or inflationary pressures would also necessitate a reassessment of our positions.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Goldman Sachs | — | 1.1200 |
UOB | — | 1.1445 |
MUFG | — | 1.1800 |
Articles Carsten: The global economy at half time Published 11:12 Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download One lesson from both football and economics is that momentum can change quickly. After a bruising first half, the global economy still has time to put in a decent second-half performance Carsten Brzeski Half-time huddle: after a challenging first half, the global economy regroups ahead of a crucial second-half push As the World Cup enters its decisive stage, it is once again reminding us that, for all the talk of shifting geopolitical and economic power, football remains largely dominated by Europe. Six of the eight quarter-finalists are European, alongside one African and one South American team.
A closer look at the remaining contenders reveals another curiosity: three of the six European teams are members of neither the eurozone nor the European Union. Could this be a reason to call for a Draghi football plan? Or a European Football Recovery fund, backed by eurofootbonds?
Or does this performance bring back the discussion about optimal government debt ratios, as the highly indebted eurozone countries, Italy and Greece, didn’t even qualify for the World Cup, while the low-debt countries, Germany, the Netherlands and Austria, are already back home. Enough, I promise. At this point, I suspect European policymakers will be keen to stress that there is absolutely no relationship between footballing success and the economy.
Even if parallels between football and the economy are far-fetched, the World Cup has offered a timely reminder that the White House can influence not only financial markets and the global economy, but also one of the world's favourite pastimes. President Trump asked FIFA President Gianni Infantino to review the red card shown to US striker Folarin Balogun, saying he believed the dismissal was unfair, leading to FIFA declaring that Balogun could play in his team's next match. That brings us to the most striking market development of recent weeks: the sharp fall in oil prices, but also the recent increase again as President Trump shifted his attention away from the World Cup and back to the Middle East.
We had already feared that the oil market was too good to be true, and now feel certain of our more conservative oil price forecasts, even when prices dropped below their pre-conflict levels. It turns out that the negotiations between the US and Iran are anything but straightforward, and that continued fragility around shipping through the Strait of Hormuz should remain the base case, rather than the benign scenario many market participants had been pricing until recently. With the drop in oil prices in recent weeks, some central bank officials, particularly at the ECB, will have doubted the need for further rate hikes and might dig out the term ‘transitory’ from the central bankers’ dictionary of forbidden words.
Sources & References
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