What the desk is arguing
The desk argues that inflation, exacerbated by geopolitical tensions and supply shocks, will cause ongoing challenges for central banks and financial markets. Per the full note , inflation rates spiked following the outbreak of the conflict in Ukraine, creating a scenario that central banks had struggled to control over the preceding decade.
Elevated inflation has already prompted shifts in central bank policies, and this trajectory suggests continued scrutiny by traders. With central banks previously lowering rates to stimulate growth, the new inflationary reality poses risks of tightening that can disrupt previously anticipated monetary policies.
Where it sits in our coverage
Current consensus targets for the EUR/USD pair are centered around a target of 1.075, with the following firm forecasts: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's view, reflective of a tightening inflation narrative, aligns closely with jpmorgan at the upper end of the spread, indicating anticipation of further strength in the Euro against the Dollar in response to ongoing inflation pressures.
How other firms see it
Firms aligned with the desk's perspective, such as jpmorgan, foresee a stronger Euro due to inflationary pressures prompting policy changes. Conversely, bofa exhibits a more cautious stance, predicting a weaker Euro influenced by ongoing inflation but sustained economic robustness in other regions.
Watch for movements in the EUR/USD as it reflects not only inflation but also the evolving monetary policy landscape amid rising global tensions and their economic repercussions.