Dollar is denied more significant gains, upside pressure in EUR/USD to dominate – Commerzbank

The market has already lowered its expectations for the February FOMC meeting and now only expects a 25 bps rate hike. Economists at Commerzbank note that the Dollar is unwanted.

Dollar-negative sentiment

“It might pay off to take a look at producer prices tomorrow or the PCE deflator and the labour cost index at the end of the month. Any publication that points more towards 25 than towards 50 bps on 1st February will be gratefully received by the market. On the other hand, the fact that the market has already lowered its expectations as regards the next rate step, means that most is already priced into the USD so that the effect of the data on the greenback is likely to be limited.”

“Over the course of the week the subject of the debt ceiling will probably increasingly become an issue. Even though the subject is only likely to become more burning in the spring, it might nonetheless ensure that in the current Dollar-negative environment the Dollar is denied more significant gains and that the upside pressure in EUR/USD will dominate for now.”