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EUR/USD: Wait for trend reversal likely to continue – Commerzbank

The EUR/USD correction that started at the end of last week seems to have been very short-lived. Michael Pfister, currency analyst at Commerzbankanalyzes the pair’s prospects.

How much USD strength is too much?

I still doubt that the current strength of the USD will last. On the one hand, some indicators certainly suggest that interest rate hikes are having an effect. On the other hand, several central banks have recently argued that the transmission could be delayed. If this is true, and if it becomes clear in the coming weeks that the scenario of an extremely robust US economy could gradually weaken, the strength of the Dollar should also decline. Ultimately, interest rate cuts should increasingly be on the agenda.

The only thing that remains to be known is whether today we will see the first signs of this. Probably not. Our economists expect the ISM services index to also surprise to the upside. We should also expect rather few hawkish comments from the ECB officials speaking today. Consequently, the wait for a trend reversal in EUR/USD is likely to continue for the time being.

Source: Fx Street

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