J.P. Morgan
Global FX Strategy 2026
Macro Scenarios
J.P. Morgan EUR/USD scenario analysis and USD macro framework
EUR/USD Fair Value by Scenario
Base case highlighted in red
Rate Spread Sensitivity
Fed-ECB spread vs EUR/USD fair value
Fed vs ECB Rate Assumptions
Central bank rate assumptions across scenarios
Most bearish EUR/USD outcome. Additional ECB cuts while Fed stays on hold.
Fed holds higher for longer. No insurance cuts delivered.
Base case. Fed delivers insurance cuts, then pauses. Moderate EUR strength.
Priced into forward curves. Represents consensus outcome.
US recession scenario. Dollar weakens significantly as Fed cuts aggressively.
USD Macro Scenario Matrix
Growth x Inflation framework for the dollar
USD weakens vs safe havens initially. Once vol shock dissipates, focus shifts to twin deficits. FX carry trades should completely unwind globally.
Recession matrix and US exceptionalism dies. US centric recession; EUR/USD strengthens if not driven by energy price shock.
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.
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.
Net result is USD outperformance but more procyclical. High yielders more insulated. Strong global growth strengthens cyclical currencies. Fiscal RV less relevant.
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.