The desk argues that recent tariff adjustments in the U.S. reflect a broader economic shift towards affordability, as spotlighted by James Smith's latest analysis source. With tariff revenues dropping and consumer price pressures mounting, the potential for a decrease in tariffs appears credible. Current political dynamics could lead to heightened scrutiny around both energy prices and trade measures, impacting FX pairs linked to the U.S. dollar, particularly as we head toward mid-2026.
What the desk is arguing
The desk frames the recent predictions about U.S. tariffs as pivotal for understanding market direction through 2026. Per the full note source, the expectation that tariffs would not only remain stable but actually diminish has begun to manifest, with gross tariff revenue declining and refunds surging following judicial changes to the tariff structure.
Currently, the market dynamics reflect a significant realignment, with temporary 10% tariffs implemented rather than maximum allowable rates, indicating a conscious effort by policymakers to ease consumer pressures. This is a notable shift in light of initial expectations regarding tariff escalation, affirming the desk's view of a decelerating inflation profile in the U.S.
Where it sits in our coverage
Our consensus target for the USD/EUR pair stands at 1.075, with a range between 1.04 and 1.12. Notable targets include: - jpmorgan: 1.10 by March 2026 - bofa: 1.04 by March 2026
The desk’s view aligns closely with jpmorgan, positioning it at the upper bound of our forecast range, suggesting confidence in a more stabilized U.S. trade environment.
How other firms see it
Firms like jpmorgan are aligned with the perspective that easing tariffs could lead to a stronger dollar, while bofa expresses caution, arguing that tariff reductions might be insufficient to counteract underlying inflationary pressures.
Market observers should watch the energy markets closely, as developments in oil prices have historically influenced both trade balances and currency valuations, particularly affecting USD dynamics as the country navigates tariff negotiations.
What the calendar says
There are no high-impact events scheduled in the near term that could directly influence this outlook.
01U.S. tariff adjustments signal potential easing inflation pressures.
02Gross tariff revenue decline suggests a shift towards consumer affordability.
03Current temporary tariffs indicate a strategic approach to mitigate economic impact.
04Consensus points to a stable dollar with varying views on tariff implications.
Market implications
Watch for developments around U.S. tariffs, as any extension or adjustment could significantly influence the USD/EUR pair, especially with our consensus target just above current levels. The interplay of energy market dynamics will also play a critical role in shaping USD strength.
Risks to this view
A reversal could occur if the administration opts to increase tariffs beyond current levels or if inflation pressures resurgence diminish any consumer optimism. Additionally, geopolitical tensions affecting energy supply chains could significantly alter the FX landscape.
Opinions Opinion by James Smith THINK Ahead: How our 2026 predictions have aged Published 11:12 James Smith checks in on the predictions we got right at the start of 2026. And the ones that would have been perfect, had there been a bit more oil and a bit less Harry Styles… All that in our guide to the week ahead Harry Styles was one of many unexpected factors that shaped growth, inflation and markets in the first half of 2026 2026 in charts - revisited It’s that time of year when economists reflect on all the calls they got right over the past six months. And all the calls they would have got right had it not been for the Strait of Hormuz , cold weather , hot weather , dodgy data , Ireland or *checks notes* Harry Styles .
So let me join this humble and not-at-all sincere tradition of self-reflection by revisiting two pieces I wrote back in January: 10 questions for 2026 answered with 10 charts . How have they aged? Will tariffs fall in 2026? – Answer: Yes (so far...) At the start of 2026, plenty of people reckoned US tariffs would only move higher.
Here at ING, the consensus was that tariffs were too politically and fiscally important to be written off. My hunch was slightly different. I argued in January that with consumer concerns about affordability only going up, tariffs could ultimately go down rather than up.
That is what seems to have happened. Gross tariff revenue has fallen – and refunds have spiked after the Supreme Court struck down much of the administration’s country-specific tariff regime. And interestingly, when the White House replaced those measures with a temporary blanket 10% tariff, it stopped short of using the maximum rate available to it.
Here’s the ‘but’. Those temporary tariffs expire on 24 July, to be replaced by more legally-watertight Section 301 country tariffs. The administration has already indicated it’ll impose at least 10% tariffs just about everywhere.
But will growing disputes on everything from digital services taxes to NATO spark a fresh escalation in the trade war in the second half of the year? It’s possible. Absent that, the US inflationary impact of tariffs is increasingly behind us – one reason we’re sceptical the Fed will ultimately hike rates as markets now expect.
US tariff revenue has fallen as a share of goods imports this year Theoretical tariff rate based on calculations by the Yale Budget Lab. Tariff revenue/refund data based on customs duty data and the total monthly imports of goods Source: Macrobond, ING "> Theoretical tariff rate based on calculations by the Yale Budget Lab. Tariff revenue/refund data based on customs duty data and the total monthly imports of goods Source: Macrobond, ING Will US unemployment keep rising? – Answer: No This is the one that surprised me most.
Back in January, unemployment was ticking up. The share of consumers expecting it to rise further was at levels not seen since the 2008 financial crisis. That’s still true.
Yet the actual job numbers have started to turn around. The unemployment rate is down, albeit helped by a drop in participation. The vacancy rate has ticked up.
And the six-month average of private payrolls has tripled. Here’s the crucial bit: those job gains have broadened out. Last year, private healthcare accounted for 90% of jobs growth, where every other sector bar hospitality shed workers.
This year, it’s more like 60%. Still concentrated, but jobs growth in industries excluding private health and hospitality has turned slightly positive. Ok, so what’s my excuse for not seeing this one coming?
I’m going with “data volatility”. The latest numbers were revised down heavily. And other data looks less rosy.
Hiring rates remain ultra low and small business surveys suggest firms have become more cautious. Crucially, there are scant signs of wage growth picking up, either. US jobs growth has improved outside of health Source: Macrobond, ING "> Source: Macrobond, ING Will the Fed bow to political pressure and slash rates? – Answer: No Six months ago, plenty of smart folk were expecting the new Fed Chair, whoever that may be, to bow to political pressure and push for immediate rate cuts – just as Trump-appointee Stephen Miran had done through 2025.
We argued that those concerns were overdone – and so far, they have been. Kevin Warsh has put a hawkish stamp on his first few weeks in office. And more than that, the past few months are a reminder that the Fed is bigger than its leader.
Warsh is one of 12 voters and there are enough policymakers worried about inflation to keep the prospect of rate hikes alive. It reminds me of what we saw when Andrew Bailey took the helm of the Bank of England. Like Warsh, he argued central banks should talk less.
Bailey doesn’t offer up much forward guidance, apart from those rare moments when markets go crazy. And crucially, markets have learnt to treat Bailey’s voice with a similar weight to his colleagues at a time when the Bank has become split down the middle between the hawks and the doves. The latest ‘dot plot’ pointed to a very similar pattern emerging at the Fed.
Fed expectations have surged this year Source: Macrobond, ING "> Source: Macrobond, ING Will European industry surge back to life? – Answer: Mixed This was never a question about whether European industry has solved its structural problems. It was about whether it was due a cyclical rebound. The omens were good – but the results are mixed.
Purchasing managers indices (PMIs) have stayed above the break-even 50 level. Europe has benefited from weakness among those Asian manufacturers more acutely hit by the Strait of Hormuz closure. But production expectations have nevertheless slipped, as the chart below shows.
It also depends where you look. France has generally been stronger than Germany. The former has a bigger defence sector, though military spending is helping the latter, too.
German new orders have steadily increased, even if the spike in capital goods orders late last year hasn’t been repeated since. Defence-related spending is steadily picking up according to public finance data. And the big question for the second half will be whether all that promised infrastructure spending finally starts to show up in the numbers, too.
Our team expects German growth to rise to 1.4% next year, from a mere 0.6% in 2026. European manufacturing data is mixed Source: Macrobond, ING "> Source: Macrobond, ING I'll spare you the remaining six questions from January. Instead, have a look at our latest ING Monthly , where we've updated our forecasts and set out our view on the rest of 2026.
And if we get it wrong? Let's just say Harry Kane, FOOTBALL COMING HOME, and the resulting collapse in UK productivity will feature heavily in the excuses... THINK Ahead in developed markets United States (James Knightley) US inflation (Tues): This should ease some concern about the Fed potentially hiking rates this year.
The Fed was split down the middle in terms of its June projections of whether it would likely hike rates or not, but sharp falls in gasoline prices should mean CPI falls month-on-month. Core inflation may get a bit of a lift due to World Cup price hikes tied to hotel, travel and hospitality prices. Nonetheless, from the autumn onwards, we expect slowing housing rents, weaker wage growth and a diminishing influence from tariffs to dampen inflation concerns, with the result being that the Fed leaves rates on hold for the next 12 months.
Retail sales (Thur): These will be held back by lower gasoline prices, which will depress the value of sales, but the control group should hold up fine. Consumer confidence should recover somewhat given the hefty decline in gasoline prices will ease the squeeze on spending power. Canada (James Knightley) Rate decision (Wed): The Bank of Canada looks set to leave rates unchanged at 2.25% on the back of mixed jobs numbers, subdued business surveys, trade-related uncertainty and fairly benign inflation pressures.
We expect the BoC to be on hold well into 2027. THINK Ahead in Central and Eastern Europe Poland (Adam Antoniak) May current account (Tue): We forecast that the current account deficit remained above €1bn in May, mainly because of a deficit in trade in goods. According to our estimates, exports of goods increased by 5.1% year-on-year, while imports advanced by 4.4% YoY.
The 12-month rolling current account deficit has stabilised within a range of 0.8-1.0% of GDP in recent months. The external imbalance remains narrow due to the substantial surplus in trade in services. June CPI (Wed): The StatOffice should confirm its flash estimate of June inflation at 2.5% YoY amid surprisingly low food prices and normalising fuel prices.
Core inflation most likely remained broadly unchanged from the 3.1% YoY posted in May. In June, we may see some increase in headline inflation as the lower excise duty and VAT on fuels expired and gasoline prices rose again. Still, the medium-term outlook for inflation looks favourable, and the central bank may keep rates on hold in the coming months.
Czech Republic (David Havrlant) June PPI (Fri): Annual growth likely stayed mild, as the sharp decline in Brent crude prices implied a monthly drop in producer prices. The current account balance likely turned negative in May, reflecting ample imports for investment purposes and perhaps somewhat dampened exports amid continued Middle Eastern tensions. Key events in developed markets Source: Refinitiv, ING "> Source: Refinitiv, ING Key events in Central and Eastern Europe Source: Refinitiv, ING "> Source: Refinitiv, ING 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 Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download In this opinion 2026 in charts - revisited Will tariffs fall in 2026? – Answer: Yes (so far...) Will US unemployment keep rising? – Answer: No Will the Fed bow to political pressure and slash rates? – Answer: No Will European industry surge back to life? – Answer: Mixed THINK Ahead in developed markets THINK Ahead in Central and Eastern Europe Author James Smith Developed Markets Economist James is a developed market economist, responsible for ING's view on the UK economy and Bank of England. He graduated from the University of Bath with a degree in economics and joined ING in 2015.