Euro: Gradual appreciation path against US Dollar – Commerzbank

FXStreet Insights Team FXStreet

Commerzbank's Chief Economist Dr. Jörg Krämer expects EUR/USD to recover once the Iran conflict eases and to grind higher over the coming quarters. Krämer links Euro strength to eroding Federal Reserve independence, falling US rate expectations and a significantly overvalued Dollar on purchasing power parity. Commerzbank's updated forecast sees EUR/USD at 1.18 by mid‑2027 and 1.19 by end‑2027.

Dollar seen weakening on Fed doubts

"The EUR/USD exchange rate should rise again after the war ends and continue to drift higher in the following quarters due to the eroding independence of the U.S. Federal Reserve, especially since the dollar is significantly overvalued in terms of purchasing power parity."

"We expect the EUR/USD rate to be 1.18 by mid-2027 (previously 1.20)."

"We expect US interest rate expectations to correct even further downward in the coming months, weighing on the dollar."

"On the one hand, inflation risks are likely to diminish with the reopening of the Strait of Hormuz, which we expect to occur by the end of the year."

"All in all, we expect a gradual rise in EUR/USD toward 1.19 by the end of 2027 (previous forecast: 1.21)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD looks for direction around 1.3500

GBP/USD alternates gains with losses around the 1.3500 neighbourhood on Tuesday. That said, Cable struggles to extend its recent marked recovery in a context of continuous instability in the Middle East, which in turn keeps the Greenback well supported.

EUR/USD treads water around 1.1540

EUR/USD struggles to gather momentum on Tuesday, trading in an inconclusive fashion around 1.1540. Indeed, the pair’s price action comes amid the absence of clear direction in the US Dollar, as traders continue to closely follow developments in the Middle East.

Gold eases from tops, challenges $4,400

Gold retreats from its earlier tops and slips back below the key $4,400 mark per troy ounce on Tuesday. The precious metal’s marginal gains comes on the back of a sidelined price action in the US Dollar amid steady uncertainty from the geopolitical landscape.

Crypto Today: Bitcoin and Ethereum consolidate, XRP dips as optimism for a US-Iran deal fades

Bitcoin (BTC) maintains a neutral outlook on Tuesday while testing support at $64,000. Investors appear to be sitting on the fence, awaiting a catalyst for a breakout above $65,000.

The inflation narrative is still way more important than the employment story

Core bonds sold off yesterday with the belly of the curve slightly underperforming in the US while European curves showed more of a bear flattening. Daily changes on the US curve varied between +4.7 bps (2-yr) and +6.4 bps (7-yr).

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.