EUR/USD: Switch from recovery to sustainably lower levels could occur around turn of the year – Commerzbank

Economists at Commerzbank discuss EUR/USD outlook.

Upside potential for EUR/USD in the coming months

“In the coming months, EUR/USD is likely to strengthen because the ECB's monetary policy is likely to be more hawkish in the near future and therefore more attractive from a currency market perspective than that of the Fed. Initially, this apparent advantage will come from the fact that the ECB is likely to continue raising interest rates while the Fed is not, and later from the fact that the ECB is sticking to its maximum interest rate level while the Fed is likely to start cutting rates.”

“In the medium term, however, the ECB is probably not really more hawkish than the Fed. On the contrary, the EUR strength we expect in the short term is therefore unlikely to be sustainable. We suspect that the turnaround in the EUR/USD exchange rate could come around the turn of the year.”

Source: Commerzbank Research