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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 39 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 39 institutional desks. No promotion.
The desk is leaning towards a gradual rise in yields through 2027 with subsequent cooling, indicating potential upward pressure on Treasury yields as high as 5.25-5.5% before a decline to 4.5-4.75%. This outlook aligns with ING's assessment which suggests sustained inflation and fiscal pressures, but a cooling regime as underlying inflation retreats. Current positioning reflects a consensus that expects long-end rates to remain in flux as tighter monetary policies may prevail amidst economic uncertainty. Per the full note , the trajectory of yields will prove critical for main FX pairs, especially EUR/USD, GBP/USD, and USD/JPY, which are influenced by these shifts in rate expectations.
The desk postulates that US Treasury yields are poised for a gradual ascent towards the 5.25-5.5% range over the next couple of years before retreating due to easing inflationary pressures. This narrative is strongly supported by ING's commentary, which emphasizes the role of persistent inflation and fiscal deficits as catalysts for higher yields. As inflation cools, we expect yields to stabilize between 4.5-4.75%, particularly as the Fed pivots towards easing later in 2027.
The scenario outlined by ING presents a credible pathway to higher yields due to systemic factors like AI-driven productivity gains and potential energy shocks that could push inflation higher. The risks of financial instability and tightening central bank policies are key considerations, as both could keep yields elevated across the curve into 2027.
Our current median consensus for EUR/USD stands at 1.1425 with a range of 1.1162-1.2000, while GBP/USD is set at 1.3500 amidst varying predictions across firms like rbc (1.3600), commerzbank (1.4020), and barclays (1.3800) for Dec-26. Similarly, JPY shows a median at 156.000, with firms like hsbc forecasting 145.000 and nomura displaying a range of targets aligning closely with market sentiment.
While the desk's forecast for upward pressure on yields aligns closely with expectations, it sits towards the upper end of these forecasts, particularly as euro and sterling rates face a potentially lower trajectory than currently anticipated by the consensus.
There is a division among firms regarding future yield trajectories: many, including rbc and hsbc, project limited upside on euro rates, indicating skepticism towards higher ECB rates, while bofa and nomura lean towards more conservative estimates. The former group's outlook complements the desk's bullish yield enthusiasm.
The expected behavior of EUR/USD will likely reflect this divergence as it corresponds to ECB monetary policy dynamics moving forward, underscoring the importance of this Fed-ECB interplay in shaping rate paths and consequent FX strategies.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should closely monitor yield movements, particularly in the context of upcoming Federal Reserve communications that may shift market expectations around rate paths. Key levels around 5.25-5.5% for the 10-year Treasury could define hedging strategies ahead of potential position adjustments.
Risks to this view
The call may be invalidated if inflation proves more stubborn than anticipated due to unexpected economic shocks or continued fiscal spending that prevents yield easing. Additionally, significant shifts in central bank messaging could prompt rapid revaluation in bond markets, altering the current yield outlook.
| Firm | Stance | YE 2026 |
|---|---|---|
MUFG | Neutral | 1.1200 |
UniCredit | Bullish | 1.1600 |
Rabobank | Bearish | 1.1000 |
All 32 desk targets for EUR/USD
Articles Rates on the brink: 3 calls for 2027 Published 08:30 Rates Translate Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Our base call sees yields rising to 5.25-5.5% before easing to 4.5-4.75% as inflation cools. Our risky call has US 10-year yields at 6% and German yields at 4%, while our bold call sees systemic stress triggering de facto yield curve control Padhraic Garvey, CFA US bond yields could face renewed upward pressure in 2027 How to read our three calls for 2027 Source: ING "> Source: ING ING's base call: Renewed upward pressure on long rates, but it ultimately wanes We expect upward pressure on Treasury yields to persist into early 2027, with AI-driven productivity growth, large fiscal deficits and sticky inflation potentially pushing the 10-year towards 5.25-5.50%. The turn should come later as inflation softens and Fed easing expectations return, pulling yields towards 4.50-4.75%.
Inflation remains the key threat heading into 2027. For euro rates, second-round inflation concerns could push 10yr swaps above 4%, but we think markets have gone too far in pricing an ECB terminal rate above 3%. Our end-2027 baseline remains 2.5%, while downside for longer-dated rates looks more limited.
AI is an upside risk. France remains the focus in sovereign spreads, with elevated risk premia likely into the elections and some widening elsewhere. But it could also offer the biggest subsequent rally: once the elections pass, receding fears of another eurozone crisis should leave considerable room for French spreads to retrace.
Our risky call: Long tenor rates just keep on rising through 2027 There are three credible routes to 6% Treasuries and 4% Bunds. First, inflation. Another energy shock, El Niño disruption or simply more persistent underlying inflation could keep central banks tighter for longer, pushing yields higher across the curve.
Second, AI. A genuine economy-wide productivity boom could lift potential growth and equilibrium real rates. The dot-com era offers a precedent: strong US growth helped push 10-year Treasury yields above 6% despite relatively benign inflation expectations.
A comparable AI-driven productivity shock could have a similar effect. Third, fiscal risk. A sharp deterioration in confidence over US and European fiscal trajectories could generate significant government-bond underperformance versus swaps.
In this scenario, the move toward 6% and 4% would reflect rising fiscal and term premia rather than expectations of tighter monetary policy. Our bold call: Long tenor rates are forced to lurch lower on official sector intervention At the extreme, policymakers could decide that rising bond yields pose an unacceptable threat to financial stability. In the eurozone, that could mean the ECB overlooking fiscal recklessness and prioritising the stability of the system and the euro.
Existing programmes leave it with considerable firepower to contain yields and fragmentation. The US has its own levers. The Treasury could cut long-end issuance and shift financing towards the front end, while the Fed could keep the funds rate sufficiently low to preserve cheap funding and counter market stress.
Taken to its extreme, renewed Fed bond buying could push the desired yield structure into place. The paradox is that policies designed to protect the system could generate even greater systemic risk through de facto yield curve control. For the US, the aim would be a generic funding rate below 4%, ideally around 3.5%.
For the eurozone, the result would likely be yield containment, with German yields ultimately trading broadly in line with Treasuries. US Treasuries Interest rates Federal Reserve Eurozone 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 Author Padhraic Garvey, CFA Regional Head of Research, Americas Padhraic Garvey is the Regional Head of Research, Americas. He's based in New York. His brief spans both developed and emerging markets and he specialises in global rates and macro relative… In this article ING's base call: Renewed upward pressure on long rates, but it ultimately wanes Our risky call: Long tenor rates just keep on rising through 2027 Our bold call: Long tenor rates are forced to lurch lower on official sector intervention
How we cover this story
Market repricing Fed tightening expectations as growth and inflation narratives shift; monitor breakout below 1.1200 for sustained EUR/USD weakness.
EUR/USD recovery testing multi-week range resistance; break-above required to confirm sustained euro strength versus downside retest risk.
French political uncertainty sustaining EUR risk premium through Q1; range 1.10–1.15 implies USD structural bid into April elections.
USD strength persisting despite geopolitical de-escalation signals suggests economic fundamentals driving flows; monitor CPI and France developments for EUR catalysts.
Cable trades 1.25% below the 20-firm median Dec-26 target of 1.35, with a 0.26-point dispersion that reflects sharply divided BoE-vs-Fed rate paths.
EUR/USD spot at 1.1227 sits 1.73% beneath a 32-firm Dec-26 consensus of 1.1425, with a 0.135 dispersion range signalling deep disagreement on the path ahead.
EUR/USD spot sits 1.77% below the 32-firm median Dec-26 target of 1.1425, with a 0.135 range separating the most and least bullish desks.
32 investment banks see EUR/USD at 1.1467 by Dec 2026
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