Commerzbank economists discuss EUR/USD outlook.
Upside potential for EUR/USD in the coming months
“EUR/USD is likely to strengthen in the coming months as the ECB’s monetary policy is likely to be hawkish in the near term and therefore more attractive from a money market perspective than the Fed’s. Initially, this apparent advantage will come from the fact that the ECB will likely continue to increase interest rates while the Fed doesn’t, and later from the fact that the ECB is sticking to its maximum interest rate while the Fed is likely to start cutting rates.
“However, in the medium term ECB probably not really more hawkish than the Fed. Conversely, the EUR strength we expect in the short term is therefore unlikely to be sustainable. We suspect that a reversal in the EUR/USD exchange rate could come at the turn of the year.”
Source: Commerzbank Research