Between mid-July and early October, the US dollar gained more than 7% against the G10 currency average. Commerzbank’s forecast table contains less USD weakness than previously.
Is recession approaching in the US?
We continue to expect the US economy to enter a recession in 2024 and for the Fed to cut its key interest rate by 100 basis points in response. However, we must note that the economic outlook is uncertain. Given that the market has already clearly priced in this scenario, an overly aggressive forecast would be inappropriate. Therefore, we reduce our target on EUR/USD from 1.15 to 1.12.
Note that if a recession occurs in the US, we still consider it likely that EUR/USD will break above 1.12. With this more cautious forecast, we only want to take into account the high uncertainty of the forecasts.
Source: Commerzbank Research
Source: Fx Street
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