Credit Ágricole: FX And Gold Outlook - FJElite

19 Jun 2026 08:45Elite Forex Metal
  • The EUR should continue to trade as collateral damage of global geopolitical risks. We are still bearish on EUR/USD from current levels but expect ECB hikes to limit the downside risks to a degree in the coming months. Subdued growth prospects and loss of international competitiveness should continue to hurt the appeal of EUR- denominated assets. US tariffs and domestic-demand-driven growth policies in the Eurozone (eg, German fiscal stimulus) should hurt Eurozone net exports & reduce corporate demand for the EUR and thus keep EUR/USD historically depressed in the longer term. Many positives seem to already be in the price of EUR/USD as highlighted by our long-term fair value model.
  • The high-yielding, safe-haven King of FX should remain supported even if geopolitical risks in the Middle East start abating, given that we expect the US economy to outperform many European and Asian economies. Resilient economic outlook and sticky inflation could continue to support Fed policy rate expectations and the USD. US policy uncertainty could persist, but we think that the US and USD exceptionalism narrative remains in place. Bear­flattening of the UST yield curve could keep USD hedging costs prohibitively high and boost the share of unhedged portfolio inflows into the US. We also expect a pick-up of FDI inflows and further think that the Fed will remain institutionally independent while a Mar-a-Lago accord to depreciate the USD need not materialise. Lastly, the USD is still the world’s preeminent reserve fiat currency; credible alternatives are lacking.
  • The CHF has hit new decade highs against the EUR and USD on the back of sustained safe-haven demand, and the SNB has had to step up its line of defence against undue CHF strength. EUR/CHF’s 0.90 looks like a line in the sand the market seems willing to respect, while reduced geopolitical threats and a subsequent risk recovery would be needed for the CHF to give up more ground.
  • We continue to expect that PM Sanae Takaichi’s policies will weigh on the JPY (1) by holding back BoJ rate hikes; and (2) through higher fiscal spending, boosting the Nikkei. The negative terms-of-trade shock from higher oil prices due to the Middle East conflict are adding weight to the JPY. The BoJ and government’s comfort zone for USD/JPY is 150-160 as this does not add significantly to inflation and keeps the JPY weak enough to support exports & corporate profits, without attracting the ire of President Donald Trump. Moves in USD/JPY above 160 would raise the risk of intervention as well as a faster pace of BoJ rate hikes. Inflation is a big voter issue in Japan and so Takaichi cannot ignore strong inflation, especially if it is due to a weak JPY.
  • We maintain a cautious GBP/USD outlook from current levels that is consistent with our above-consensus view on the USD. The GBP could also remain a pressure valve for anxious market participants that fret about the negative consequences from unfolding political drama in Westminster. The GBP could be vulnerable if persistent stagflation risks fuel concerns about the UK economic and fiscal outlook. We believe however, that some negatives are already priced into the GBP especially vs the EUR, given that the Eurozone would have to deal with the consequences from the negative oil supply shock in the wake of the Iran war as well. We further note that the GBP is already looking quite oversold while global investors seem underinvested in UK assets.
  • USD/CAD has come to challenge the upper bound of its 1.35/1.40 range following a more hawkish June FOMC. Risks of the BoC falling behind the Fed will have to be swiftly tamed for the range-trading pattern to not be durably threatened, as evidence of Canada’s macro resilience could help in the process.
  • The RBA’s rate hike cycle is leading the rest of the G10, helping AUD/USD maintain an upward trajectory in H126. The positive terms-of-trade shock from higher global energy prices are somewhat insulating the currency from the Middle East conflict. The Fed holding off cutting rates further & a strong USD will limit AUD/USD upside and bring it modestly lower in in H226.
  • We expect a bounce in NZ’s economy & building prospects of RBNZ rate hikes in H226, as strong soft commodity prices and a reduction in US equity market outperformance relative to Asia should lead to a slow grind higher in NZD/USD in 2026. Higher oil prices are a significant negative terms-of-trade shock, however, and are holding the currency back as well as generating downside risks to our forecasts if the conflict in the Middle East continues.
  • The NOK has had to give up some ground following the correction in energy prices, while still being among the best G10 FX performers. A superior carry appeal and Norway’s solid fundamentals should call for some NOK appreciation to resume in H226, while consolidation could prevail in the near term.
  • The SEK has struggled this year after outperforming in 2025. Risks of a wider policy gap between the Riksbank and the ECB could leave the SEK on the back foot in the near term, while more convincing evidence of Sweden’s macro outperformance over the Eurozone is needed for the SEK to reverse course later in the year.
  • Gold should remain supported by lingering market worries that the combination of growing government borrowing & sticky inflation in G10 will make it difficult to find buyers for the ballooning public debt. Fears about fiscal dominance over the Fed could also weigh on US real yields some more, in another boost to XAU. It would take a renewed rebound of the US economic outlook and higher real US rates & yields to dent the XAU’s strength in 2026.