MUFG EMEA
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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 MUFG team, led by George Goncalves, emphasizes a cautious outlook for the upcoming Jackson Hole Symposium, suggesting a low likelihood of interest rate hikes in the near term. Per the full note , they outline three strategic paths for Fed Chair Warsh's address, each carrying distinct market implications. The prevailing sentiment within MUFG is that recent economic data does not support a case for tightening, despite some market speculation about future rate adjustments. As we approach the September FOMC meeting, clarity from Jackson Hole could shape market expectations significantly.
The MUFG macro strategy team views the Jackson Hole Symposium as a pivotal moment where key signals regarding monetary policy may emerge. They anticipate that Warsh's opening remarks will help to clarify the Fed's stance on interest rates. Their assessment indicates no compelling argument for a near-term hike, as they remain aligned with a dovish narrative centered on current economic conditions.
Supporting this view, recent macroeconomic data trends suggest that inflation pressures and growth indicators are not yet compellingly strong enough to drive the Fed towards rate increases. The team posits that recent trends support the notion that the Fed will likely maintain its current policy stance, indicating a strong dovish bias leading into the September FOMC meeting.
By framing the upcoming symposium in such a light, MUFG implicitly rejects the alternative narratives that suggest imminent rate hikes or policy tightening in response to inflation or employment metrics, which have yet to show significant upticks that could pressure the Fed to shift.
Our current consensus target for the USD/EUR pair stands at 1.075, with a range between 1.04 and 1.12. Specific per-firm Dec-26 targets include:
This positioning appears to align closely with the dovish expectations articulated by MUFG, which suggests that they likely align within the established range, leaning towards the upper bound.
Broadly, firms like jpmorgan and credit suisse share a similar view of the Fed's dovish outlook, emphasizing caution towards immediate rate hikes. Conversely, bofa diverges, suggesting a more hawkish approach with potential tightening sooner than MUFG's forecasts would indicate.
It's worth noting that any changes in inflation reports or employment figures might juxtapose against these expectations, specifically influencing the USD/EUR and USD/JPY pairs in the near term, given the direct market ties to U.S. monetary policy sentiment.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should monitor the USD/EUR and USD/JPY pairs closely, particularly following the Jackson Hole Symposium for potential shifts in sentiment. Any clear dovish signals may support stronger positions in these pairs, especially if the Fed continues to signal no urgency for tightening.
Risks to this view
Should upcoming economic data, particularly inflation or employment metrics, show surprising strength, it could force the Fed to reconsider its stance, leading to increased volatility in FX markets and potential rate hike expectations.
Joining us in this special podcast, George Goncalves, MUFG Head of Macro Strategy and Agron Nicaj, MUFG’s US Desk Economist preview what to expect from the Fed’s Jackson Hole Symposium. The Macro Strategy team see 3 potential options that Warsh can take when delivering his opening remarks, all with different market implications. The team also covers their latest macro thinking and how its driving their Fed and rates views ahead of the Symposium, which could be one of the last opportunities for the markets to get a clear signal ahead of the September FOMC.
Given recent trends, the team still see no compelling case for a hike in the near future.
How we cover this story
Persistent EUR/USD bearish flows into year-end suggest technical breakdown risk if support levels fail to hold.
French OAT repricing widening EUR/USD spreads vs Treasuries maintains structural headwind for euro through risk-off sentiment.
Elevated eurozone political risk narrows the valuation case for EUR, creating technical support levels worth monitoring on EUR/USD dips.
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