Commerzbank economists analyze the future path of USD exchange rates.
The USD’s valuation depends on US inflation and US short-term interest rates.
“USD Valuation? Depends on US inflation and also US short-term interest rates. Because the dollar can also be bought and sold in the short term. But as the currency market looks to the future, so that a move in the USD that can be expected in the future emerges now, it is the longer-maturity yields, after all, that are decisive.”
“The spread of real 5y-5y yields over corresponding Eurozone yields has narrowed recently (when EUR/USD mainly appreciated). That’s over now. That is: the market does not expect higher inflation, but expects that the Fed will have to do more to control it. That is why the dollar appreciates; and not because rising US yields increase the effectiveness of current US monetary policy.”
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.
