In the opinion of economists commerzbankthe Euro is likely to appreciate somewhat more against the Dollar heading into the end of the year, if interest rate cuts become tangible in the United States.
Is the ECB the most aggressive central bank?
In the medium term, we expect the Fed to lower its benchmark rate again next year as the US economy cools. At the same time, the ECB is likely to maintain interest rates despite declining inflation and increasing headwinds for the eurozone economy. This means that the ECB is taking a more hawkish stance than the Fed, which should benefit the Euro. However, the exact timing of the currency market’s reaction to the described monetary policy divergence is difficult to predict. Therefore, we anticipate a gradual appreciation of the Euro towards the end of the year.
In the long term, however, the strength of the Euro is unlikely to be sustainable.. According to our economists, the ECB is likely to be less successful in controlling inflation than the Fed in the long run. Regardless of which of the two central banks offers the higher real interest rate for their respective currency, the Euro is likely to see an increase in the inflation risk premium.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
