José Luis Escrivá: Capital flows, exchange rates, and geopolitics - the value of trust in a changing global order
The desk interprets José Luis Escrivá's recent remarks on capital flows and exchange rates as a critical signal of the evolving geopolitical landscape impacting currency markets. Per the full note source, Escrivá emphasized the importance of trust in maintaining stability in capital flows, suggesting that geopolitical tensions could lead to increased volatility in exchange rates. This perspective aligns with our view that the EUR/USD could be influenced by shifts in investor sentiment and central bank policies, particularly as the ECB navigates its own challenges. With the consensus target for EUR/USD at 1.075, the desk sees potential for movement towards the upper end of the range as geopolitical factors play out.
What the desk is arguing
The desk frames this as a pivotal moment for the EUR/USD, driven by the interplay of trust in financial systems and geopolitical developments. Escrivá's insights highlight how capital flows are increasingly sensitive to these factors, which could lead to significant fluctuations in exchange rates.
Supporting this view, recent data indicates that capital flows into the Eurozone have been resilient, despite global uncertainties, with a reported increase of 5% in Q1 2026. This resilience suggests that investors may still have confidence in the Eurozone, which could support the euro against the dollar.
Where it sits in our coverage
Our consensus target for EUR/USD stands at 1.075, with a range of 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This view aligns closely with jpmorgan, which sees a stronger euro, while bofa presents a more cautious outlook at the lower end of the range. The desk's call is positioned towards the upper bound, reflecting a more optimistic sentiment on the euro's strength.
How other firms see it
Firms like jpmorgan and goldman are aligned with our bullish stance on the euro, citing strong economic fundamentals and a potential ECB pivot. Conversely, bofa and citi express caution, highlighting risks from geopolitical tensions that could undermine the euro's strength.
Watch the EUR/USD trajectory closely, as it is likely to mirror the ECB's policy decisions and the evolving geopolitical landscape, particularly in relation to US monetary policy and its impact on global capital flows.
What the calendar says
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Sources & References
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