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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 36 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 36 institutional desks. No promotion.
The commentary from UBS highlights a critical operational gap in the measurement of US consumer price inflation due to ongoing governmental disruptions, specifically pointing to the inability to calculate the October inflation numbers. Per the full note source, this absence of data collection not only casts doubt on the accuracy of the inflation figures but also raises concerns about the increasing reliance on estimation methods and the reduction in city coverage in the Consumer Price Index (CPI). Given this context, the potential for higher inflation readings that are unrecorded might be skewing public perception and inflationary expectations, especially in light of the income inequality that suggests larger segments of the population are facing inflation rates exceeding the official average. This discrepancy may fuel market volatility as traders respond to a potentially overstated economic stability while leveraging inaccuracies within current inflation metrics.
The desk posits that the inability to accurately report CPI statistics could aggravate inflation fears among investors, despite no objective increase in consumer prices being documented. According to UBS, having fewer employees to collect data means that many recent inflation observations could end up being approximate rather than precise.
As of now, the concern is not grounded in actual price increases, but rather in a flawed data collection process that could misrepresent the economic landscape. This could lead to an unreasonable increase in risk premium for certain assets, reflecting trader sentiment based on faulty information, rather than sound economic fundamentals.
Currently, our consensus target for EUR/USD is 1.075, with a range between 1.04 and 1.12. Notably, jpmorgan holds a bullish target of 1.10 for March 2026, while bofa projects a more conservative stance with a 1.04 target for the same time frame.
This perspective aligns with the bullish stance from jpmorgan, suggesting that rising inflation fears may drive a stronger euro against the dollar, lifting it towards the higher end of the consensus range as traders re-evaluate their positions in light of potential underreported inflation pressures.
Many firms share a similar outlook regarding the implications of inaccurate inflation readings, including jpmorgan, indicating an overall bullish sentiment towards USD weakness. In contrast, bofa takes a more cautious view, projecting lower movement of the EUR/USD pair towards their 1.04 target, reflecting a more bearish stance on inflation dynamics.
Analysts should pay close attention to the reaction in currency pairs such as USD/JPY, as shifts in US domestic inflation measures could also impact the Bank of Japan's monetary policy decisions.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should watch for increased volatility in the EUR/USD pair, particularly if upcoming inflation reports show significant discrepancies from prior estimates. The market could react sharply if perceived inflationary pressures materialize.
Risks to this view
Should the government resume full functionality and inflation metrics be reported accurately, any reversion to previously calculated figures could validate lower inflation expectations, negatively impacting risk premiums and potentially reversing current bullish sentiment.
Good morning, this is Paul Donovan, Chief Economist at GBS Global Wealth Management. It's three o'clock in the morning London time on Thursday the 13th of November. We should be getting the release of US October consumer price inflation today.
We will not be getting that release, neither now or, it seems, ever. The October 2025 consumer price inflation number has disappeared into the government shutdown void. There was no one to go out, with the modern equivalent of a clipboard, to note down prices.
And one cannot impartially measure past prices in the future, so the weighted average of prices cannot be calculated. This failure to measure what was almost certainly a modest increase in the inflation figure highlights a rather important point. The US Bureau of Labour Statistics has been experiencing a lack of funding, and that has meant it has employed fewer people to measure prices.
The lack of people to measure prices affects US inflation calculations, even when the numbers are actually being measured. With fewer people to go out and measure prices, more and more of the US consumer price inflation in recent months would appear to be dependent on guessing, or, more accurately, using prices from neighbouring areas to guess at what might be happening in areas where prices are not being surveyed. Added to that, some cities have been dropped from the measurement entirely.
One could further add to the problem by pointing out that the plutocratic nature of consumer price inflation, combined with increased US income inequality, means that perhaps as much as three quarters of the US population are experiencing an inflation rate that is higher than the reported average number. None of this helps to convince ordinary people that inflation is being accurately measured. The mistrust around inflation also, perhaps, speaks to administration officials suggesting that tariffs on food imports might be cut to help bring down US food prices.
Consumers tend to be unusually sensitive to food prices because food is a high-frequency purchase and thus the 1.85% increase in grocery prices since December last year is memorable. All the more so when the price of things like bananas, which are obviously imported, has risen 7.6% over the first three quarters of this year. The question is whether cutting tariffs would translate into lower consumer prices.
Bananas are something of a case study. The post-tariff import price of bananas into the United States has fallen since April, when tariffs were imposed. The consumer price for bananas has risen in the US over the same period in a way that has not been seen elsewhere because the tariff narrative seems to have allowed retailers to get away with increasing prices.
Whether this price increase would be reversed just because the administration chooses to reverse some selective tariffs is uncertain. With this backdrop, yesterday's torrent of Fed speak sounded somewhat less inclined to rush to cut interest rates. There is a sense that the direction of interest rates is still down, but whether that translates into near-term rate reductions is a great deal less certain.
Fed Governor Cook, who is perceived to be inclined to cut rates, will definitely vote at the December FOMC meeting. However, the Supreme Court will be holding hearings into whether Cook can continue to perform their role as a Fed Governor while legal proceedings continue before the January FOMC. There is therefore uncertainty about whether Cook will vote at the January meeting.
The administration's attempts to remove Cook may thus result in one fewer vote for a rate cut. The data calendar is generally pretty quiet today. UK third quarter GDP is due for revision, which is only likely to attract attention if it is revised lower.
Certain financial news wires seem to gleefully stress any negative spin that they can possibly find for the UK. The ECB monthly bulletin is unlikely to excite a great deal of attention. That's all for today.
Have a good day. This material has been prepared and published by the Global Wealth Management Business of UBS Switzerland AG, regulated by FINMA in Switzerland. It's subsidiaries, or affiliates, collectively referred to as UBS.
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