Euro is likely to appreciate only slightly against the Dollar

Economists at Commerzbank expect the EUR/USD exchange rate to end the year at 1.1000

Limited upside potential

We see limited upside potential for EUR/USD this year. By the end of the year, we expect prices to be around 1.1000.

The Euro is likely to appreciate slightly over the next few months if it becomes clear that the ECB will cut its key interest rate more slowly than the market had previously expected. However, the EUR-positive effect is unlikely to last. If the market recognizes that Eurozone inflation is stuck at stubbornly high levels, even moderate ECB interest rate cuts will be seen as inappropriately loose monetary policy and therefore EUR-negative.

Even if Fed rate cuts are priced in, the dollar may suffer a little because of the current strength of the USD if they are actually announced. However, the negative effect will probably be limited by the fact that it should soon become clear that the Fed will cut interest rates less than the market had previously expected. In contrast to the ECB, the Fed's stance is also likely to be USD-positive in the medium and long term given the lower inflation we expect in the US.

Another USD-positive argument is that the growth gap between the US on the one hand and the Eurozone and most other G7 economies on the other is likely to widen further.

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.