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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
The desk argues that the recent decline in DXY-weighted short-term implied volatility reflects a notable anomaly, particularly given increasing geopolitical tensions and the Federal Reserve's tightening cycle. Per the full note from ing-think, this low-volatility environment—now at levels not seen since 2021—suggests potential risks for a rebound in volatility and a strengthening of the USD in the near term. With the GBP rally stalling, opportunities for EUR/GBP upside become increasingly likely as well. However, current market dynamics indicate that the next movements will hinge critically on upcoming economic data and geopolitical developments.
The desk emphasizes that the current state of low DXY short-term implied volatility is unexpected considering heightened risks from geopolitical events, particularly the ongoing military tensions involving the U.S. and Iran, and the Federal Reserve's potential for further tightening. Per the full note from ing-think, implied volatility has breached the 5.50 threshold—a level previously seen in the early months of 2021.
The rationale provided by the analysts indicates that volatility remained contained even amidst significant market upheaval from March through May, which may have fostered a low-volatility carry-trade environment. The emphasis on AI-driven equity market resilience appears to underscore this low-volatility landscape, where any triggers from oil price movements or geopolitical escalations could lead to non-linear market responses.
Should these volatility dynamics remain stable, the desk identifies a pathway where the dollar could strengthen against other currencies; however, external shocks could easily alter this trajectory.
Currently, our consensus target for EUR/USD is 1.1700, with a range from prevailing firm forecasts indicating potential movements between 1.1200 and 1.2000. Notable firm targets include: - Goldman: Dec-26 target 1.1200 - Citi: Dec-26 target 1.1000 - Commerzbank: Dec-26 target 1.2200
This positioning aligns closely with the desk's view of potential upside, given that the median consensus is just slightly above the current spot, which is supporting expectations for upward movement in the EUR complex.
Several firms appear aligned with this bullish outlook on EUR/USD, including Goldman and MUFG, signaling expectations for continued EUR strength. In contrast, firms like Citi and Rabobank hold more hesitant views, targeting lower levels for EUR/USD at year-end.
The trajectory of EUR/USD is intricately tied to shifts in ECB policy and macroeconomic indicators, making it crucial to monitor not just the USD's strength but also broader developments affecting the euro area, particularly as they relate to upcoming economic data releases.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should focus on the 1.1700 level as a consensus target for EUR/USD, watch for volatility upticks in response to oil price shifts, and monitor upcoming U.S. economic data for clues on Fed policy direction.
Risks to this view
Any significant de-escalation in Middle Eastern tensions or a dovish turn from the Federal Reserve could catalyze a weaker dollar across the board, contradicting the current bullish outlook.
| Firm | Stance | YE 2026 |
|---|---|---|
Rabobank | Bearish | 1.1400 |
Danske Bank | Bearish | 1.1100 |
Bank of America | Bullish | 1.2200 |
All 28 desk targets for EUR/USD
Articles FX Daily: Unpacking the low-vol puzzle Published 07:35 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download DXY-weighted short-term implied volatility has continued to fall, now at 2021 levels, ignoring geopolitical and rate dynamics. The main reason could be the overall contained response to this spring’s events. Risks are definitely of a pick-up in volatility from now on, and of short-term USD gains.
The GBP rally has stalled; we expect more EUR/GBP upside Francesco Pesole and Frantisek Taborsky DXY short term vols are very compressed USD: Low vols carry risks DXY-weighted one-month implied volatility has broken below the 5.50 area that marked the January, May and June lows. Excluding the Christmas 2025 dip, it is now at its lowest level since 2021. That is remarkable given the serious military re-escalation between the US and Iran and the prospect of a new Federal Reserve tightening cycle.
The explanation goes beyond the muted energy-market response to the July Gulf headlines. We suspect it primarily reflects how well contained volatility remained between March and May despite sizeable moves in both rates and commodity prices. Incidentally, AI-fuelled equity resilience still appears to be anchoring currencies and helping sustain a self-reinforcing low-volatility, carry-trade environment.
At this stage, risks are clearly skewed to the upside for both FX volatility and the dollar. The longer oil prices only partially price a new supply shock, the greater the risk of non-linear rallies. But there is also a realistic path towards Middle East de-escalation, lower oil prices and more dovish flexibility at the front end of the USD curve.
That would ultimately point to a weaker dollar across the board. This remains our baseline for after the summer, although we acknowledge that the near-term backdrop looks far less supportive for USD bears. Today’s US calendar includes University of Michigan surveys, industrial production and housing starts.
We will also hear from Fed dove Philip Jefferson after yesterday’s unsurprisingly hawkish remarks from Lorie Logan and Jeffrey Schmid. Francesco Pesole EUR: Stuck rangebound for now Our macro team has published their preview of next week’s European Central Bank meeting. We expect a consensus hold, but rising oil prices have reopened the door to a surprise hike.
Higher energy costs have pushed the macro backdrop back towards the ECB’s June baseline scenario, which assumed at least two rate hikes. While softer inflation data argues for patience, some hawks may favour another “insurance” hike to reinforce the ECB’s inflation-fighting credibility. Our base case remains a September move, but next week’s meeting could still deliver one final hawk-dove showdown before the summer break.
Barring surprising revisions in the eurozone’s June CPI, markets’ headline fatigue can keep EUR/USD hovering around the 1.420/1.460 area today. For the moment, there appears to be little in place to drive either a break above 1.150 or a retest of sub-1.135 levels. Francesco Pesole GBP: More room to give back gains EUR/GBP has rebounded after an extended run of an important break lower.
Still, at 0.850, it remains around 1.5% undervalued according to our short-term fair value model. As discussed recently, positioning adjustments and carry trade attractiveness likely played an important role in driving GBP strength. But approaching a change in government (Andy Burnham becomes UK Prime Minister next week) with short-term overvaluation is a risk for the pound.
Watch for headlines about Burnham today, as he’s scheduled to make a big speech. Incidentally, we still see plenty of downside risk for front-end GBP rates. Market pricing for 35bp of tightening by year-end looks way too aggressive.
Our call remains a hold. We still expect a return to 0.870 in EUR/GBP by the end of the summer. Francesco Pesole CEE: Surprising sell-off bringing new opportunities After two days of relief in Central and Eastern Europe, markets moved back into risk-off mode yesterday, contrary to our expectations, with a broad sell-off across asset classes.
Elevated oil prices and higher core rates pushed CEE rates higher, with a steepening bias. Markets slightly increased the implied probability of Czech National Bank rate cuts, now pricing almost two hikes. In Poland, rate cut expectations for this year fell to around 20%, while in Hungary the expected easing cycle has been scaled back from 150bp a few days ago to 120bp.
Hungarian assets are facing the heaviest selling pressure within the whole EM space over the last several days, which we attribute to crowded long positioning and a broadly bullish market view since the April general elections. Yesterday’s move likely reflected some profit-taking and risk reduction amid global uncertainty. However, we do not think the underlying story has changed much: both rates and FX remain attractive, particularly after the sell-off and improved entry levels.
We continue to see value at the front end of the curve, further steepening and the currency, while the recent sell-off appears to have been overdone. EUR/HUF stabilised above 361, its highest level since mid-May and close to post-election levels. We still see 350-360 as the most likely EUR/HUF range for the rest of the year.
Frantisek Taborsky 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 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… 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… In this article USD: Low vols carry risks EUR: Stuck rangebound for now GBP: More room to give back gains CEE: Surprising sell-off bringing new opportunities
How we cover this story
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USD strength resumes after recent weakness; monitor whether bounce represents correction or reversal of prior EUR/USD downtrend.
EUR/USD spot sits 2.19% below the 28-firm median Dec-2026 target of 1.17, with a 0.20 range separating the most and least bullish desks.
EUR/USD spot at 1.1421 sits 2.39% below the 28-firm median Dec-26 target of 1.17, with a 0.20 range separating the most and least bullish desks.
EUR/USD spot sits 2.85% below the 28-firm median Dec-26 target of 1.1750, exposing a consensus that remains structurally bullish on the euro.
28 investment banks see EUR/USD at 1.1704 by Dec 2026
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