Global outlook H2-2026: A test of resilience
The desk posits that the second half of 2026 will be critically shaped by inflation trends, U.S. dollar dynamics, and evolving geopolitical contexts, as outlined in the research by Standard Chartered. The report underscores pressing risks emerging from energy markets and AI developments which could profoundly influence financial market stability. Per the full note, with central banks continuing to navigate these turbulent waters, attention will be necessary on how these pressures unfold. As such, maintaining a strategic view on dollar positioning will be crucial, especially given potential volatility on the horizon.
What the desk is arguing
The desk argues that global economic resilience will be rigorously tested in H2 2026. The insights provided by Standard Chartered's experts highlight critical influences ranging from persistent inflationary pressures to shifting U.S. dollar valuation, scrutinizing the broader implications for financial markets.
Recent trends on inflation may see the U.S. Federal Reserve maintaining a vigilant stance, particularly as inflation rates persist at elevated levels. The commentary suggests that inflation could remain above 2%, compelling action that impacts currency markets directly.
Where it sits in our coverage
Currently, the consensus target for the USD/EUR pair is set at 1.075, falling within a range of 1.04 to 1.12. Significant contributors to this consensus include: - jpmorgan: 1.10 target for Mar26 - bofa: 1.04 target for Mar26
This assessment aligns with the prevailing sentiment among major banks, suggesting that fluctuations could hover around the midpoint of the range as economic risks are recalibrated in response to incoming data.
How other firms see it
Several firms, such as jpmorgan and citi, maintain similar bullish views on the U.S. dollar based on robust economic activity and inflation forecasts. In contrast, bofa holds a more cautious stance, anticipating potential downside risks driven by softer growth metrics.
The trajectory of EUR/USD remains a key watch point as both central banks reassess policy positions in light of evolving economic scenarios stemming from global pressures. Movements in energy prices and AI-driven sectors are also indicative of shifting investor sentiment impacting currency values.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Economists warn of a resilience test for global markets in H2 2026 due to inflation and geopolitical pressures.
- 02Critical financial market implications may arise from changing U.S. dollar dynamics and energy market fluctuations.
- 03Diverging views across major financial institutions suggest heightened market volatility ahead.
- 04Investors should closely monitor inflation trends as they might substantially influence monetary policy.
Market implications
Traders should be vigilant for movements around the 1.075 level in the USD/EUR pair, especially as inflation data releases could catalyze significant volatility. The potential for policy shifts at central banks in response to rising inflation will be pivotal in shaping currency valuations.
Risks to this view
A decisive reversal in this call could follow if inflation data significantly underperforms or if geopolitical tensions accidentally escalate, leading to unanticipated shifts in market sentiment that undermine current forecasts.
Standard Chartered’s Eric Robertsen, Global Head of Research and Chief Strategist; Razia Khan, Head of Research, Africa and Middle East; and Edward Lee, Chief Economist and Head of FX, ASEAN & South Asia, unpack the forces set to shape the second half – from inflation and the US dollar to geopolitics, the AI push and energy markets – and their impact on key economies. They also explore where risks may be building and what that could mean for financial markets in the months ahead. This podcast was recorded on 15 July.
This podcast is provided for informational purposes only. It does not constitute a personal offer, recommendation, or solicitation to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices. Please see Terms & Conditions - Standard Chartered Global Research for full disclosures or email us at ResearchClientServices@sc.com for any questions.
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