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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 35 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 35 institutional desks. No promotion.
Our desk believes that the persistent hawkish bias from central banks will continue despite easing rates influenced by falling oil prices. Per the full note source, the underlying reason hinges on the risk of second-round inflation effects, which are being amplified by positive economic data and market sentiment. The European Central Bank (ECB) is maintaining a strong hawkish narrative, with a September rate hike now priced at over 80%. Current consensus on EUR/USD sees the pair at 1.1583 for December 2026, amidst this backdrop of rising rate expectations, aligning with the positive outlook for the UK economy as well.
The desk continues to emphasize a hawkish trajectory for central banks, particularly in Europe, where inflation risks remain a dominant concern. As noted in the source commentary, despite lower oil prices easing some pressure on rates, we do not foresee a significant shift in the ECB's stance given the robust economic indicators emerging from the Eurozone.
The dynamics in the market are supported by economic data that remains resilient, particularly the positive Purchasing Managers' Index (PMI) results. This combination of market optimism and relative economic strength allows for a tighter monetary policy atmosphere without substantial economic repercussions.
For EUR/USD, our consensus target is currently 1.1583, with a per-firm coverage ranging from 1.1200 to 1.2000 for December 2026. Notable targets include: - deutschebank: 1.2500 - ubs: 1.2000 - bofa: 1.1200.
The desk's projection sits within the middle to upper range of the broader market views, suggesting a more optimistic outlook compared to firms like bofa, which has positioned a lower target for March 2026.
Aligned with our views are firms such as deutschebank and ubs, which also reflect a bullish sentiment on EUR/USD in the longer term. Conversely, more cautious approaches are seen from firms like bofa, whose lower targets reflect reservations about the pace of economic recovery in the region.
Nearby currency pairs also bear close monitoring, particularly USD/JPY, with its movements closely tied to the Bank of Japan's (BoJ) evolving rate path and the Fed's potential policy adjustments in response to inflationary pressures. The correlation with the Eurozone's economic data remains critical as it could impact USD/JPY forecasts as well.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should closely monitor the 1.1500 resistance level for EUR/USD, as movement beyond this point could signal further bullish momentum. With a key rate decision approaching in September, positioning ahead of this event will be critical, especially for those holding longer-term positions in the Eurozone.
Risks to this view
A significant deviation in inflation data, coming in hotter than current forecasts, could force the ECB's hand, leading to a rapid revision of rate hike expectations, which would adversely affect the EUR/USD outlook. Likewise, any geopolitical disruptions affecting oil supply could trigger a shift in market sentiment and risk appetite.
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bullish | 1.1565 |
Bank of America | Bearish | 1.1200 |
UBS | Bullish | 1.2000 |
All 30 desk targets for EUR/USD
Articles Rates Spark: Market optimism helps hawkish bias Published 07:30 Rates Spark Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Lower oil prices are helping to ease rates, but the hawkish sentiment remains supported as second-round inflation risks continue to loom. Market optimism and relatively robust economic data mean central banks won't be pushing back against market expectations for more policy tightening Michiel Tukker Even with lower oil prices, hawkish sentiment remains supported on second-round inflation risks Hawkish sentiment won’t fade overnight For euro rates, the main driver remains oil, and with hopes of the Strait of Hormuz reopening, Bund yields have eased lower compared to last week. Brent is back below $80/bbl, inching closer to the previous levels when tankers started passing through the Strait at the end of June.
But when oil was at a price similar to now in June, the 2Y euro swap rate was 2.75%, some 20bp lower than the 2.95% we see today. This means that even if oil were to push lower, don’t expect a return to normality in the near term. As oil stays elevated for longer, even at these prices, the risk of second-round inflation effects continues to mount, keeping central bank pricing hawkish.
Recovering growth numbers, as also highlighted by the PMI readings from Wednesday, allow the European Central Bank to maintain a hawkish narrative without risking too much of an economic drag. A September hike is now priced in at more than 80% and the public pushback from ECB officials seems limited. With lower oil prices, a second rate hike is now no longer priced in by markets, however.
Unless inflation data comes in hotter than expected, we also don’t see the need for two hikes from here. Market optimism helps support higher 10Y rates Meanwhile, global optimism is helping longer rates stay higher as the S&P 500 heads well into new records on solid earnings announcements. The positive sentiment is also reflected in the VIX, which is close to this year’s low, despite plenty of looming geopolitical uncertainty.
European government bond spreads can still tighten further if the monetary policy uncertainty eases, but that would require oil volatility to fall first. In any case, if Friday’s US payroll numbers can support markets’ optimism, then longer rates could easily test higher still, especially US rates. The 10Y UST yield is now at 4.6%, but the broader underlying trend higher seems to have lost little momentum, and that despite lower oil prices.
Fed Chair Warsh turning too dovish for markets’ liking is still a risk and that exposes the long end to higher yields as we approach September’s meeting. Thursday’s events and market view From the eurozone we have retail sales data from June. The US will publish Challenger job numbers and jobless claims, which will be watched closely as we receive payroll numbers on Friday.
In terms of supply, Spain will auction 5y SPGB, 7y SPGB, 10y SPGB and 13y SPGBei for a total of €6.75bn. France will auction 10y OATs, an 11y Green OAT and an 18y Green OAT for a total of €12.5bn. 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 Author 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… In this article Hawkish sentiment won’t fade overnight Market optimism helps support higher 10Y rates Thursday’s events and market view
How we cover this story
EUR/USD technical setup suggests upside momentum toward 1.1600 resistance, implying near-term USD weakness in the pair.
Technical break above 1.1600 suggests momentum flow may continue pressuring USD/EUR higher in near term.
USD/JPY trades 5.16% above the 23-firm Dec-2026 median of 150.0, with a 25.5-point dispersion range signalling deep disagreement on the BoJ-Fed spread path.
EUR/USD spot sits at 1.1551, just 0.28% below the 30-firm Dec-26 median of 1.1583, but a 0.20-wide dispersion band signals deep disagreement beneath the surface.
EUR/USD spot sits 0.40% below the 30-firm median Dec-26 target of 1.1583, with a 0.20 dispersion range signalling deep disagreement beneath a neutral headline bias.
30 investment banks see EUR/USD at 1.1654 by Dec 2026
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