Today, Ulrich Leuchtmann, Head of Commodities and Currency Research at Commerzbank, takes an interest in the question of how currency traders should prepare for a scenario where the central bankers’ nightmare comes true: if the massive rate hikes that were applied and are yet to be carried out were not enough to control inflation.
What would happen to EUR/USD in an inflationary nightmare scenario?
“I think that anyone who has to choose between the dollar and the euro will rather decide for the dollar in view of these criteria. It seems that The ECB is notorious in the markets for being a bit slow in reflexes. The fact that the Euro is not trading at stronger levels is likely due, at least in part, to its long vacillations. The forex market punishes those who are too late with a weak currency.
“Yesterday they asked me why, Despite everything, I expect EUR/USD to be stronger by the end of the year that now. The answer is simple: because we project that this horror scenario does not occur. Consequently, every day that this does not happen is a good day for the common European currency.”
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.
