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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 38 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 38 institutional desks. No promotion.
The desk anticipates that the Brazilian real (BRL) will experience downward pressure following President Lula's unexpected electoral victory, as outlined in the recent research from ING. This outcome has generally led to a negative sentiment towards Brazilian assets, with traders likely to adjust their positions to reflect increased uncertainty. Per the full note, we expect central bank policies to remain hawkish which continues to support the dollar, especially against emerging market currencies like the BRL. The broader geopolitical environment, particularly rising tensions in the Middle East, further strengthens the dollar's position globally, as evidenced by the ongoing volatility and market reactions that will likely unfold this week.
The prevailing sentiment is that the BRL will weaken amidst uncertainties arising from Lula's win, leading to profit-taking in Brazilian assets. Per the full note, the markets are set to react negatively as traders reassess Brazil's political landscape and its implications for economic policy and growth.
The dollar, on the other hand, is likely to remain buoyed by firm energy prices and hawkish signals from the Federal Reserve. Recent trends indicate that the USD could retain its strength, maintaining a range around 101.45 to 101.85 on the DXY, with implications for BRL further depreciating.
Our current consensus target for the BRL is 1.075, with a range from 1.04 to 1.12. Key firms such as rabobank and bnpparibas project various nuances in exchange rates, anchoring their December 2026 targets around 1.10 and 1.15 respectively. The desk's stance anticipates a bearish move, aligning with the lower end of our consensus range.
Aligned firms include those taking a bearish view on the BRL, particularly rabobank and bofa with their respective targets. Contrarily, other firms may have divergence in their outlook, indicating a more optimistic view on the BRL that may not encompass the harsher realities perceived by the desk.
There will be consequential overlap with the trajectories of broader currency pairs like EUR/USD, especially as European Central Bank decisions loom later this week, possibly impacting emerging markets including Brazil.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should watch for a potential break below 1.075 for the BRL, indicating a more profound shift in currency sentiment. The geopolitical landscape's evolving status may provide key signals for trade positioning, particularly around federal outcomes this week.
Risks to this view
A reversal in this bearish outlook could arise from stronger-than-expected economic indicators from Brazil, a deflation of geopolitical tensions, or a dovish shift in Federal Reserve signaling. Any positive outcome from Lula’s policies that fosters investor confidence could also undermine our current stance.
| Firm | Stance | YE 2026 |
|---|---|---|
Danske Bank | Neutral | 1.1200 |
UOB | Bearish | 1.1140 |
TMGM | Neutral | 1.1450 |
All 29 desk targets for EUR/USD
Articles FX Daily: BRL set to suffer on surprise Lula win Published 07:54 Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download FX markets face a busy week full of central bank meetings, data releases and politics. With energy prices firm and expectations growing that the US and Israel will launch another attack on Iran, we expect central banks to stay hawkish. This should keep the dollar supported on dips.
Expect Brazilian assets to sell off today on President Lula's surprise win Chris Turner , Frantisek Taborsky and Francesco Pesole Brazilian assets look set to correct lower after President Lula's surprise win on Sunday USD: Geopolitical environment remains dollar positive The dollar is starting a busy week relatively supported. It is a week that includes key events such as the FOMC meeting , third-quarter earnings from big tech companies and geopolitical events, including tomorrow's elections in Israel. There are also a whole host of central bank meetings across G10 currencies, including those in the eurozone, Japan, Canada and New Zealand.
The balance of risks suggests that the dollar can probably hold onto its gains. Yes, interest rate spreads have moved a little against the dollar as the recent US tech wobble has pared back Federal Reserve tightening expectations. But energy prices remain at their highs, and the arrival of a third US aircraft carrier group in the Gulf makes further escalation in the Middle East more likely than not.
Barring some clearly underwhelming 3Q results from the likes of Alphabet and Microsoft on Wednesday, we think higher energy prices and a hawkish Fed can keep the dollar supported this week. That means the DXY dollar index can probably stay in a 101.45 to 101.85 range today. We don't really see the need for it to correct lower to 101.25 unless US tech drags US equities sharply lower.
Chris Turner EUR: Business sentiment surprisingly resilient Friday's release of flash October PMIs for the eurozone remained surprisingly resilient and pointed to some decent third-quarter growth figures. The exception was France, however, where weak growth is hardly going to help the country's fiscal malaise. Separately, OAT-Bund spreads have narrowed this morning after Moody's maintained France's Aa3 rating on Friday.
This means France retains at least one AA rating. While welcome news in the short term, we will need to see concrete and material progress on the French budget over the coming months to take pressure off the euro. That seems unlikely, and high energy prices are hardly helping.
On the subject of energy, last week's release of the eurozone current account surplus for August at just €8.7bn (the lowest since the start of 2023) provided a reminder of the toll higher energy prices are taking on the bloc's external position. This, alongside a U-turn in Fed policy, had contributed to a very weak EUR/USD at the time. Today's session is expected to see stable German Ifo business sentiment, where the important expectations component is seen at a healthy level near 90.
Any downside surprise here could hit the euro. And while the recent 10bp narrowing in EUR/USD two-year swap differentials might make the case for a slightly higher EUR/USD, we see plenty of justification for a 1-2% risk premium to stay in the euro. We favour 1.1250/70, capping EUR/USD upside in the near term, and see the 1.1180 support level as vulnerable this week.
Chris Turner CEE: Zloty remains the weak link The significant deterioration in global sentiment last week has only intensified existing pressure on emerging market currencies, and we remain bearish on the CEE region. The calendar is light this week, with attention focused on the upcoming Fed and European Central Bank meetings. The first notable data releases will arrive on Friday, featuring October inflation figures for Poland as well as 3Q GDP data for the Czech Republic and Hungary.
Inflation in Poland is expected to fall from 4.1% to 3.7% year-on-year, largely due to the introduction of a government price cap on fuel. GDP figures should confirm a slowdown in the Czech Republic to just under 2.0%, while showing a continued recovery in Hungary to similar levels. In the Czech Republic, a blackout period begins on Thursday ahead of the Czech National Bank's November meeting.
We saw some initial statements last week and expect more in the coming days. We anticipate a rate hike at the November meeting, with the CNB currently preparing the market for such a move. On Friday, EUR/PLN tested new highs since 2023 and broke through the key 4.400 level.
We have long identified the zloty as the most vulnerable currency in the region, and given its rate outperformance relative to CEE peers, there is likely further upside for EUR/PLN. Friday’s inflation data from Poland could help stabilise the market. EUR/CZK also decoupled from the interest rate differential; a hawkish CNB should help the pair return to the 24.250–24.300 range.
EUR/HUF is gradually approaching 368, a level where we expect new sellers to emerge. Frantisek Taborsky BRL: Lula comes back from the brink In a huge surprise, incumbent Brazilian President Luiz Inácio Lula da Silva has won the presidential election run-off with 51.8% of the vote. This is the first time since 1989 that a second-placed candidate has come from behind to win the run-off.
The victory is not without its controversy, however. The opposition candidate, Flavio Bolsonaro, wants the election result annulled since a Supreme Court judge extended polling hours at the last minute. Some polls had already closed, and claims are that the polls that were extended tended to be in Lula's voting base in the Northeast of the country.
Early indications are that key authorities have no interest in re-running the election. Important for local financial markets will be how quickly Bolsonaro accepts the result – or at least allows the constitution to run its course. That is what his father did 44 hours after losing to Lula in 2022, a move that provided some calm to markets.
For today, however, expect Brazilian markets to be hit hard. USD/BRL gapping 5-7% higher at the open to the 5.20/25 area should be no surprise, while the local Bovespa equity index looks set for double-digit losses. The moves could turn out to be larger if the external environment deteriorates again and US Treasury yields spike.
The fiscal side has always been Brazil's Achilles heel, and a 7-8% budget deficit and 70% net debt-to-GDP ratio leave Brazil vulnerable in a global bond sell-off. Instead of fiscal consolidation under Bolsonaro, Brazilian assets are instead going to have to contend with Lula’s campaign pledges, including a shorter working week. Chris Turner FX Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Chris Turner Global Head of Markets and Regional Head of Research for UK & CEE Chris is Global Head of Markets and Regional Head of Research for UK & CEE. Together with his team, he provides short and medium-term FX recommendations for ING's corporate and… Frantisek Taborsky EMEA FX & FI Strategist Frantisek is an FX & FI Strategist covering EMEA markets, having joined the bank in 2022.
He provides short- and medium-term recommendations for ING's corporate and institutional client… Francesco Pesole FX Strategist Francesco is an FX Strategist and has been with the firm since May 2019. His main focus is on the G10 space and, in particular, on European and commodity currencies. He began his career at Credit… In this article USD: Geopolitical environment remains dollar positive EUR: Business sentiment surprisingly resilient CEE: Zloty remains the weak link BRL: Lula comes back from the brink
How we cover this story
Danske Bank's downside EUR/USD bias from 1.12 signals institutional consensus forming around structural euro weakness.
USD weakness driven by falling Treasury yields creates near-term EUR/USD support, but structurally bearish setup below 100-day SMA warrants caution on bounce durability.
EUR/USD rejection at 1.1260 and consolidation near 1.1200 suggests USD strength persists; bounce-trap narrative implies downside bias remains favored.
Cable trades at 1.3371, roughly 0.95% below the 20-firm median Dec-26 target of 1.35, with a 0.26-point spread separating UBS at 1.50 from Citi at 1.24.
USD/JPY trades at 157.03, roughly 2.64% above the 25-firm Dec-26 consensus of 153.0, with a 25.5-point dispersion signalling deep disagreement on the BoJ-Fed spread path.
USD/JPY trades 2.53% above the 25-firm median Dec-26 target of 153.0, with a 25.5-point dispersion range signalling deep disagreement on the BoJ-Fed spread path.
29 investment banks see EUR/USD at 1.1505 by Dec 2026
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