ING THINK
Loading…
FX BANK FORECAST · COVERAGE
Institutional FX coverage in your inbox
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 37 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 37 institutional desks. No promotion.
The desk posits that while inflation and consumer confidence metrics are pivotal for the eurozone's economic outlook, they are currently overshadowed by global forces impacting EUR rates. Per the full note from ing-think, the ECB's focus remains on the rise of long-term rates, which it acknowledges as a significant headwind to growth, thus necessitating a careful and 'measured response'. The current target consensus for GBP/USD stands at 1.3511, with forecasts ranging from a conservative 1.2400 to a more optimistic 1.5110 in 2026.
The desk holds that the European Central Bank (ECB) is grappling with global economic pressures that overshadow domestic inflation and consumer data. Per the full note from ing-think, while second-round inflation effects are anticipated, their visibility in current data remains limited due to lag in wage adjustments amidst an ongoing energy crisis.
The commentary highlights ECB President Christine Lagarde’s remarks on the increased long-term interest rates, which she suggests may impede growth more significantly than previously thought. With the central bank maintaining a 'middle path', it is essential for market participants to closely monitor the unfolding CPI data and its implications on monetary policy going forward.
Our current consensus target for GBP/USD is set at 1.3511, with estimates from key firms indicating a broad range for March 2026:
This view aligns fairly with the current market consensus, as RBC and Barclays post targets close to our median expectation, while Nomura skews more pessimistic at 1.3200, indicating a cautious outlook on the pair.
Firms such as Scotiabank and HSBC are aligned with our outlook, suggesting a bullish sentiment towards the GBP in the medium term, while BofA remains contrary with a lower target of 1.3400 for March 2026.
Current dynamics also intersect with the evolving EUR/USD exchange rate and the Bank of England's monetary policies, as both play crucial roles in shaping market expectations within the FX landscape.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should watch for any significant deviations in the upcoming eurozone CPI data, which could alter market sentiment towards the ECB's policy path. Additionally, monitor GBP/USD's movement around 1.3500, as deviations could signal shifts in trader positioning and sentiment ahead of potential policy announcements.
Risks to this view
A surge in consumer confidence or unexpected alignment of inflation metrics may prompt a faster-than-anticipated ECB policy shift. Additionally, adverse developments in the energy sector could heighten inflation risks, thereby altering the expected trajectory for both the ECB and the GBP/USD pair.
| Firm | Stance | YE 2026 |
|---|---|---|
Citi | Bearish | 1.2400 |
J.P. Morgan | Bearish | 1.2800 |
Crédit Agricole | Bearish | 1.3000 |
All 18 desk targets for GBP/USD
Articles Rates Spark: Global crosswinds leading euro rates Published 07:15 Rates Spark Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Inflation and confidence data releases are important for the eurozone economic outlook, but are not the main drivers of rates at the moment. Second-round inflation effects take time to show up in the data. Meanwhile, the ECB sees higher long-term rates as a growth headwind and remains committed to a 'measured response' Michiel Tukker and Benjamin Schroeder In the eurozone, AI-related investments are a bigger theme than consumers Consumers are still pessimistic, but are not a main player From the eurozone, we will watch the first country-level CPI releases and confidence data, though neither is likely to distract from the broader global crosswinds.
Markets will watch for signs of second-round inflation effects, but these are unlikely to appear in this week’s data. In particular, the pass-through into wages takes time to materialise as energy prices stay elevated longer. European Central Bank President Christine Lagarde reiterated on Monday that wages were not yet showing a material response to the energy shock.
The ECB appears more aware of the headwind that rising market rates can pose. In her hearing at the European Parliament, Lagarde remarked that long-term interest rates had risen notably, which would slow growth and also reduce the pass-through more than was assumed in the September projections. She stated the ECB remained on the 'middle path' it had laid out earlier in the year, where a 'measured response' was still appropriate despite the larger energy shock.
The one clear weakness in global sentiment data is consumer confidence, but consumption is not driving the upturn in the economic outlook. AI-related investments are the bigger theme, and the role of the consumer in this narrative is unclear. Potential job losses from AI can weigh on consumer sentiment even while aggregate growth numbers paint a more positive picture.
The bigger surprise would be a pickup in consumer sentiment. A pickup in consumption would add significant heat to an already resilient eurozone growth outlook. In that case, brace for more ECB interest rate hikes.
Tuesday's events and market view Geopolitical headlines and upward pressure on energy prices provide rates with an excuse to push higher. EUR markets will look to the first country CPI data out of Spain for confirmation as headline rates are expected to rise. There is also a very busy slate of ECB officials: Nagel, Kazimir and Vujcic represent the hawkish end, President Lagarde, Chief Economist Lane and Italy’s Cipollone come from the neutral to dovish spectrum.
Also watch out for Bank of England speakers Mann and Taylor. In terms of US data, the focus will be on the JOLTS job opening numbers as well as the Conference Board’s consumer confidence index. It will also be busy on the Fed speaker front with Bowman, Goolsbee, Musalem, Williams and Waller among others scheduled for the day.
The primary market focus is the new 20y bond from the Netherlands to be launched via DDA (€5-6bn). Italy will auction a new 5y bond alongside taps in the 10y benchmark and 10y floater (€8bn). The UK auctions 10y gilts (£4.35bn).
Rates Daily 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 Authors Michiel Tukker Senior UK & Eurozone Rates Strategist Michiel Tukker is a Senior UK & Eurozone Rates Strategist based in London.
Before ING, he worked as a quantitative economist for the Dutch central bank, at BlackRock in its Financial Markets… Benjamin Schroeder Senior Rates Strategist Benjamin Schroeder is a senior rates strategist at ING in Amsterdam. Before joining ING in 2016, he worked in fixed income research at Dresdner Kleinwort and Commerzbank in Frankfurt, Germany.… In this article Consumers are still pessimistic, but are not a main player Tuesday's events and market view
How we cover this story
Peace negotiations or geopolitical de-escalation would reduce safe-haven demand and remove structural EUR support, pressuring EUR/USD toward lower levels.
Cable trades at 1.3241, roughly 2.64% below the 20-firm median Dec-26 target of 1.36, with a 0.26-point spread separating the most bullish and bearish desks.
Cable trades 2.67% below the 20-firm median Dec-26 target of 1.36, with a 0.26-point dispersion that reflects genuine disagreement on the BoE-Fed rate path.
Cable trades 2.61% below the 20-firm median Dec-26 target of 1.36, with a 0.26-point dispersion that reflects sharply divided BoE-vs-Fed rate paths.
18 investment banks see GBP/USD at 1.3596 by Dec 2026
View the live GBP/USD forecastBNP |
UBS |
SG |
MUFG |