EUR/USD: The euro will gradually appreciate

Economists at Commerzbank believe that if a U.S. rate cut becomes feasible, the euro could appreciate further against the dollar until the end of the year.

Is the ECB the more hawkish central bank?
In the medium term, we expect the Fed to cut key interest rates again next year as the US economy cools. Meanwhile, the ECB is likely to keep interest rates on hold despite falling inflation and mounting headwinds facing the euro zone economy. That means the ECB is taking a more hawkish stance than the Fed, which should benefit the euro. However, the exact timing of the currency market reaction to the divergence in monetary policy described above is difficult to predict. Therefore, we forecast a gradual appreciation of the euro towards the end of the year.

However, in the long run, the strength of the euro is unlikely to last. According to our economists, the ECB is likely to be less successful than the Fed in controlling inflation in the long run. Whichever of the two central banks offers the highest real interest rates on their respective currencies, could lead to an increase in the euro’s inflation risk premium.

foreign exchange

fxcurrencyconverter is a forex portal. The main columns are exchange rate, knowledge, news, currency and so on.

© 2023 Copyright fxcurrencyconverter.com