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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
The desk notes that recent remarks from U.S. President Trump have induced a notable reaction in equity markets, reflecting heightened sensitivity to individual comments in the current investment climate. Per the full note source, while these comments might temporarily influence market sentiment, the underlying economic effects of previous trade policies remain unchanged. Current U.S. consumer sentiment appears positive; however, corporate sentiment is cautious due to the unpredictable nature of Trump’s trade and fiscal policies, raising questions about their sustainability amid potential policy swings.
The desk frames this as a crucial moment where market dynamics are overly reliant on the remarks of individual political figures rather than broader economic fundamentals. Trump's comments represent an attempt to mitigate future economic damage, but the lasting impact of previous tariff policies complicates the recovery narrative.
The underlying data reflects a divergence between consumer confidence and corporate sentiment. Recent indicators, such as the Dallas FAD manufacturing survey, emphasize corporate anxiety amidst ongoing trade uncertainties. The Fed's prospect of holding rates steady, as shown in its May meeting minutes, further compounds this hesitancy, demonstrating the potential lag in responding to evolving economic conditions.
Currently, we hold a consensus target of 1.075 for EUR/USD, with a range from 1.04 to 1.12 for March 2026. Specific targets from notable firms include: - JPMorgan: 1.10 - BOFA: 1.04
This viewpoint aligns with JPMorgan, suggesting a stronger euro given potential stabilization in trade talks. Conversely, it diverges from BOFA’s more bearish outlook, sitting above their target and near the upper limit of our consensus range.
Firms like JPMorgan are aligned with a bullish stance on the euro, attributing strength to potential easing of trade tensions. On the other hand, BOFA maintains a contrary position, positioning for a weaker euro amid ongoing uncertainties.
Investors should closely monitor U.S. trade policy announcements and consumer sentiment shifts, particularly as these factors influence EUR/USD volatility in the near term.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should keep an eye on EUR/USD as volatility is likely to be influenced by any further comments from Trump regarding trade policies. The next significant data point to assess will be the upcoming Federal Reserve meeting minutes which may clarify monetary policy stances amid this uncertainty.
Risks to this view
A change in sentiment from Trump regarding trade negotiations or an unexpected deviation in Fed policy could materially impact the euro's strength. Any escalation in trade tensions or a negative data release on corporate sentiment might strengthen the dollar against the euro.
Good morning, this is Paul Donovan, Chief Economist at GBS Global Wealth Management. It's four o'clock in the morning London time on Wednesday the 28th of May. Positive moves by equity markets are being attributed to optimism over Euro-US trade talks in the wake of some remarks by US President Trump.
This highlights two aspects of modern investing. The first is the complete focus on the thoughts and social media postings of one individual. A concentration of market focus in this way is unusual.
The second is for the potential for markets to overreact to the comments of one person. Trump does not have the power to undo the damage that tariffs have already done, merely the power to limit the extent of future damage. The question is whether markets are reflecting the existing damage appropriately.
While consumer sentiment data was more positive in the US, there are indications of corporate paralysis in the absence of policy certainty and the threat of further wild swings in policy. The Dallas FAD manufacturing survey remained coordinated in the tone of the comments section regarding both trade tariffs and uncertainty, despite at least some of the responses coming after Trump's partial receipt from taxing goods from China. More corporate sentiment figures are due today.
One of the highlights today is the release of the US Federal Reserve's minutes from the 7th of May meeting, a meeting which left policy unchanged. These matter because investors want to know how much the Fed's policy is going to be hostage to the unpredictability of the US administration's policy, which extends beyond trade taxes in to wider issues around fiscal policy, as yet still unresolved. While wait-and-see often suggests that Fed policy decisions would be taken too late, it may actually be the best option available to the Fed, given the wild swings in policy to date.
To try and anticipate what administration policy will eventually settle down to, and how business and consumer behaviour will be changed by a climate of fear and instability, seems almost impossible. This is likely to push the Fed into a more reactive stance, and it is this that investors will want some clarity on. Europe has some points of interest.
The European Central Bank's consumer inflation expectations are not normally market-moving, but they are still worthy of some attention. French consumer price inflation was lower than expected yesterday, and the perception of European inflation is likely to be lower more generally. Consumers around the world are not great at forecasting inflation because of frequency bias, which places far too much emphasis on the price of food and fuel as high-frequency purchases.
That does mean, however, that recent lower fuel prices might lower inflation expectations. Lower fuel prices appear to have boosted US consumer confidence and lowered US inflation expectations in the data released yesterday. There's also German labour market data today, which is worth a glance because of the signals it gives about the general potential for German domestic consumption.
Low fear of unemployment is always important when considering the consumer of any country, and it's worth noting that the German consumer has outperformed the overall economy over the past year. French April consumer spending data is also due. That's all for today.
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