Wall Street banks have started to release their forecasts for the end of 2022 for euro/dollar, dollar/yen, and the benchmark U.S. 10-year Treasury yield.

Here is a summary of their forecasts:

Bank Euro/dollar Dollar/yen U.S. 10-year

Treasury yield

Barclays $1.19 115 yen 1.75%

Morgan Stanley $1.18 118 yen 2.1%

Goldman Sachs $1.18 111 yen 2.0%

JP Morgan $1.12 114 yen 2.10%

(end-Sept 2022)

Wells Fargo $1.10-$1.18 110-120 2.00-2.50%

Amundi $1.14 116 yen 1.80-2.00%

Comments:

Barclays:

Dollar: “We expect modest U.S. dollar depreciation over the coming year, reflecting our views of a positive backdrop for risk and commodities alongside moderate U.S. dollar overvaluation. Upside risks are largely from risk-off moves rather than U.S. outperformance and limited relative to downside risks stemming from aggressive market pricing for tighter Fed policy.”

Morgan Stanley

U.S. 10-year yields: “Continued strong growth in 2022, alongside receding but above-target inflation, keeps the Fed patient, yet gradually moving toward rate hikes, and keeps Treasury yields moving higher.”

Dollar vs euro and yen: “We see an up-and-down profile for the U.S. dollar. A Fed emphasizing that maximum employment is ways away and that subsequent hikes post-lift-off are likely to be gradual despite improving data is likely to increasingly contrast with other central banks who, having been quite dovish so far, are beginning to discuss normalization plans of their own. Policy divergence increasingly becomes policy convergence, and U.S. dollar turns lower in response.”

Goldman Sachs

Dollar: “Although the broad dollar likely has more downside than upside over the medium term, for it to actually depreciate the structural and cyclical drivers need to align, and we are now less sure that will be the case over the coming year. … We revised down our 12-month EUR/USD forecast to $1.18 from $1.25 previously.”

JPMorgan

Dollar: “Policy repricing amid the ongoing supply-side inflation shock continues. Monetary policy divergence remains a theme for some pairs. Developments in the U.S. — a more open-minded Fed on inflation and a tight labor market report – are supportive of U.S. dollar longs against the euro and yen.

Amundi:

Dollar: “While recognising there is little the Fed can do to surprise market expectations, but disappoint at this stage, we see the sequence of slowing global growth and the Fed starting its modest policy normalisation remaining, on balance, positive for the U.S. dollar.”