What the desk is arguing
The desk posits that the euro's recent appreciation is underpinned by credible signals from the ECB regarding imminent rate hikes. Per the full note from InvestingLive, ECB sources have suggested that a June hike is 'very likely,' with several governors advocating for at least two increases unless there is a favorable resolution to ongoing geopolitical conflicts.
Supporting this view, the ECB's discussions reflect a consensus on the necessity of tightening monetary policy in response to inflationary pressures, particularly in light of rising oil prices. The commentary notes that several governors believe that without a significant drop in Brent crude, further hikes are essential to stabilize the economy.
Where it sits in our coverage
Our current consensus target for the euro stands at 1.075, with a range from 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This perspective aligns with jpmorgan, which is positioned at the higher end of the range, while bofa presents a more cautious outlook. The desk's call reflects a bullish sentiment that is consistent with the prevailing market dynamics.
How other firms see it
Firms like jpmorgan and citi are aligned with the bullish outlook on the euro, anticipating further strength as the ECB pivots towards tightening. Conversely, bofa and deutsche maintain a more bearish stance, projecting weaker euro performance amid economic uncertainties.
The trajectory of EUR/USD will be closely tied to the ECB's rate path, while developments in geopolitical tensions and oil prices will also play a critical role in shaping market sentiment.
What the calendar says
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