Cross-Firm Scenario Analysis

Recession · Soft inflation → Bearish → safe haven initially, then weakens

USD weakens vs safe havens initially. Once vol shock dissipates, focus shifts to twin deficits. FX carry trades should completely unwind globally.

Recession · Firm inflation → Stagflation → complex, initially USD positive

Recession matrix and US exceptionalism dies. US centric recession; EUR/USD strengthens if not driven by energy price shock.

Jobless growth · Soft inflation → Bearish bias, 2025-style playbook

USD weakens in step-wise fashion as Fed terminal gets revised lower. Dollar weakens most vs EUR and mid-yielding cyclical FX. Periods of consolidation as Fed terminal starts consolidating.

Jobless growth · Firm inflation → Death zone → range-bound, flipping regimes

Offsetting factors for FX trends. USD flips between bearish, bullish and range-bound regimes depending on degree of Fed easing. Growth divergences will inform FX. Fiscal RV relevant.

Jobs growth re-emerging · Soft inflation → Death zone → pro-cyclical but messy

Net result is USD outperformance but more procyclical. High yielders more insulated. Strong global growth strengthens cyclical currencies. Fiscal RV less relevant.

Jobs growth re-emerging · Firm inflation → Bullish → US exceptionalism returns

Strong US growth keeps Fed on table. Highly USD-supportive. Carry outperforms. Low-yielders most vulnerable. High yielders more insulated though still weaker vs USD.

Recession · Soft inflation → Sharply Bearish → twin deficits amplify weakness

USD weakens 10-15% on TWI. Safe haven flows initially support JPY and CHF but EUR also rallies as fiscal cushion perceived. EM carry unwinds violently. Gold surges.

Recession · Firm inflation → Stagflation → initially messy, then USD bearish

Stagflation worst for USD as Fed credibility questioned. Fed independence concerns amplify dollar weakness. EUR/USD could overshoot. JPY and CHF benefit most.

Below trend · Soft inflation → Bearish → Goldman base case

USD weakens selectively - 'Different Dollar Downside'. EUR and JPY capture most of the move. Commodity FX benefits from global growth resilience. DXY by year-end.

Below trend · Firm inflation → Range-bound with bearish lean

Offsetting forces. Fed on hold supports USD carry but twin deficits weigh. EUR range-trades. JPY grinds lower against USD. EM carry mixed.

Above trend · Soft inflation → Moderately bearish → global risk-on

Pro-cyclical USD weakness as global growth accelerates. Risk appetite favors commodity FX and EM. EUR/USD. AUD and NOK outperform. JPY lags.

Above trend · Firm inflation → Neutral to modestly bullish → US exceptionalism returns

Strong US growth and firm inflation keep Fed on hold or hiking. USD supported but gains limited by twin deficits. EUR/USD consolidates. EM carry outperforms.

Soft landing · Soft inflation → Bearish → orderly USD decline

ING base case. Fed cuts gradually, USD weakens in orderly fashion. EUR, AUD, Scandis outperform. EM carry thrives. DXY by year-end.

Soft landing · Firm inflation → Range-bound → modest USD weakness

Fed cuts delayed but still coming. USD weakens more slowly. EUR/USD grinds. Carry still works but with lower Sharpe ratio.

US recession · Soft inflation → Initially bullish → then sharply bearish

Initial safe haven USD bid, then aggressive Fed cuts drive sharp dollar weakness. EUR/USD overshoots. AUD, NZD initially weak then recover. EM carry unwinds violently.

US recession · Firm inflation → Stagflation → highly uncertain

Most challenging scenario for FX. USD initially supported by safe haven, but stagflation erodes confidence. EUR/USD volatile with no clear trend. Gold outperforms all currencies.

Global recovery · Soft inflation → Bearish → broad USD weakness

Best scenario for risk FX. Synchronized global growth drives capital out of USD into higher-beta currencies. AUD, NOK, SEK, EM FX all surge. DXY breaks.

US exceptionalism returns · Firm inflation → Bullish → USD rebound

Tail risk for our bearish USD view. US growth re-accelerates, Fed pauses or hikes. USD rallies broadly. EUR/USD back. EM FX under pressure. Carry mixed.

Recession · Soft inflation → Initially bullish (safe haven), then bearish

USD spikes on risk-off but weakens as Fed cuts aggressively. JPY and CHF outperform. EM carry devastated. GBP vulnerable given UK fiscal constraints.

Recession · Firm inflation → Stagflation - complex, range-bound

US exceptionalism dies. Fed constrained by inflation. EUR/USD range-bound. Gold and CHF benefit. EM currencies face worst outcome.

Soft landing · Declining inflation → Bearish - base case for H1 2026

Our central scenario. Fed cuts support global risk appetite. USD weakens 5-6% on DXY. GBP, AUD, and Scandis outperform. JPY rallies on BoJ normalization. EM carry performs well.

Soft landing · Sticky inflation → Mixed - flips between bearish and neutral

Fed easing slowed by sticky inflation. USD weakens less than soft landing scenario. EUR/USD range. GBP still outperforms on UK specifics. JPY gains limited.

Reacceleration · Soft inflation → Neutral to slightly bullish

US growth surprises to upside without inflation. Fed pauses. USD supported but high-beta FX also benefits from global risk-on. V-shape DXY scenario.

Reacceleration · Firm inflation → Bullish - US exceptionalism returns

Strong US growth with persistent inflation. Fed on hold or hikes. Highly USD supportive. JPY weakens. EM under pressure. Only GBP can keep pace given UK carry advantage.

Recession · Soft inflation → Bearish after initial safe-haven spike

USD initially rallies on risk-off but quickly reverses as Fed cuts aggressively. JPY and CHF outperform. EM carry unwinds. EUR benefits from relative resilience if EU fiscal spending cushions the blow.

Recession · Firm inflation → Stagflation - range-bound, high vol

Worst scenario for risk assets. USD range-bound as safe haven demand offsets growth concerns. Fed constrained. Gold and CHF benefit most. EM devastated.

Soft landing · Declining inflation → Bearish - our base case

Central scenario. Fed eases 150bp, DXY declines 5%. EUR/USD on German fiscal boost. JPY normalizes. Commodity currencies rally. EM carry thrives in low-vol environment.

Soft landing · Sticky inflation → Moderately bearish - slower USD decline

Fed easing delayed but still directionally dovish. DXY still declines but only 3%. EUR/USD reaches instead. JPY gains more limited. EM carry still positive but reduced.

Reacceleration · Soft inflation → Neutral - goldilocks for risk assets

Strong global growth without inflation. USD mixed as strong US data offset by global risk-on. High-beta FX outperforms. AUD and NOK benefit most. JPY weakens slightly.

Reacceleration · Firm inflation → Bullish - US exceptionalism

Tail risk scenario. US growth surges with persistent inflation. Fed forced to hold or hike. USD rallies sharply. Post-peak thesis invalidated. EUR/USD back.

Recession · Soft inflation → Sharply Bearish → twin deficits amplify weakness

USD weakens sharply as twin deficits become focus. Safe haven flows initially support but quickly reverse. EUR and CHF primary beneficiaries. EM carry unwinds completely.

Recession · Firm inflation → Bearish → stagflation undermines confidence

Stagflation scenario most negative for USD as real rates turn deeply negative. Gold and CHF outperform. EUR benefits if not energy-driven. Commodity currencies mixed.

Jobless growth · Soft inflation → Bearish → structural headwinds dominate

Base case scenario. USD weakens steadily as twin deficits and European fiscal expansion drive rotation. EUR, GBP, NOK, SEK outperform. EM carry delivers strong returns.

Jobless growth · Firm inflation → Modestly Bearish → competing forces

Fed on hold longer than expected but fiscal deterioration still weighs. EUR range-bound. NOK and AUD benefit from commodity link. EM carry mixed.

Jobs growth re-emerging · Soft inflation → Neutral → growth offsets deficits

Strong US growth partially offsets twin deficit drag. USD range-bound. Cyclical currencies outperform. EM high beta currencies rally.

Jobs growth re-emerging · Firm inflation → Modestly Bullish → US exceptionalism lite

Strong growth + firm inflation keeps Fed hawkish. USD strengthens modestly. Low yielders underperform. High yielders insulated by carry.

Recession · Soft inflation → Very Bearish → Great Rotation accelerates

US recession turbocharges the Great Rotation. Capital outflows from US assets become a torrent. EUR/USD could overshoot. JPY rallies sharplys. EM suffers initially but recovers as USD weakens.

Recession · Firm inflation → Bearish → stagflation amplifies USD bear

Worst-case for US assets. Stagflation undermines both the equity and bond pillars of USD support. Gold, CHF, JPY outperform massively. EM differentiates sharply.

Jobless growth · Soft inflation → Bearish → Great Rotation base case

Base case for the Great Rotation. Capital gradually shifts to Europe and Asia as US growth normalizes. EUR/USD reaches, USD/JPY. Scandis and EM outperform.

Jobless growth · Firm inflation → Modestly Bearish → Fed constrained

Fed held higher by inflation but twin deficits still weigh. Rotation continues at slower pace. EUR range. JPY still appreciates on BoJ normalization.

Jobs growth re-emerging · Soft inflation → Neutral → competing forces

Strong US growth partially offsets structural USD bearishness. Rotation slows but doesn't reverse. EUR/USD stabilizes. Risk-on supports EM and commodity FX.

Jobs growth re-emerging · Firm inflation → Modestly Bullish → only scenario USD rallies

Only scenario where USD strength returns. Strong growth + firm inflation keeps Fed hawkish. But structural twin deficit headwinds limit gains to 3-5%.

Recession · Soft inflation → Bearish → but orderly decline

USD weakens as Fed cuts aggressively. GBP outperforms as UK resilience stands out. EUR gains modestly. JPY rallies on safe haven. EM carry unwinds but selectively.

Recession · Firm inflation → Complex → stagflation scenario

Most challenging scenario. USD initially mixed as inflation supports rates but recession undermines confidence. CHF and gold outperform. GBP relative winner in G10.

Jobless growth · Soft inflation → Moderately Bearish → base case

Base case. USD declines moderately as Fed eases and global growth normalizes. GBP top performer in G10. EUR range-bound with upside bias. EM carry delivers.

Jobless growth · Firm inflation → Neutral → competing forces

Fed constrained by inflation, limiting USD downside. GBP still outperforms on fiscal clarity. EUR range-bound. EM carry selective -- TRY, ZAR work; BRL riskier.

Jobs growth re-emerging · Soft inflation → Neutral to slight bearish → Goldilocks

Best environment for risk assets. GBP rallies further on pro-cyclicality. AUD, NOK outperform on commodity demand. EM carry delivers strongly across the board.

Jobs growth re-emerging · Firm inflation → Modestly Bullish → US resilience

Only scenario where USD strengthens. Fed stays hawkish. GBP resilient on relative carry. Low yielders (JPY, CHF, SEK) underperform. EM carry mixed.