Commerzbank economists expect the EUR/USD exchange rate to end the year at 1.1000
Limited upside potential
We see limited upside potential for EUR/USD this year. By the end of the year, we expect prices to be around 1.1000.
The Euro is likely to appreciate slightly in the coming months if it becomes clear that the ECB will cut its official interest rate more slowly than the market expected. However, the positive effect of the Euro is unlikely to be long-lasting. If the market recognizes that Eurozone inflation is stuck at stubbornly high levels, even moderate ECB interest rate cuts will be seen as inappropriately loose monetary policy and therefore negative for the Euro.
Even if Fed rate cuts are in the cards, the Dollar may suffer a bit due to the current strength of the USD if they are actually announced. However, the negative effect will likely be limited by the fact that it should soon become clear that the Fed will cut interest rates less than the market expected. Unlike the ECB, the Fed's stance is also likely to be positive for the USD in the medium to long term, given the lower inflation we expect in the United States.
Another positive argument for the USD is that the growth gap between the US, on the one hand, and the Eurozone and most other G7 economies, on the other, is likely to widen further.
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.
