Economists at Commerzbank have slightly changed their forecast for the EUR/USD exchange rate.
Upside potential for EUR/USD to be limited in the short term
In the coming weeks, EUR/USD may remain under pressure as US economic data improves. These data are likely to keep hopes alive for a relatively more restrictive interest rate policy from the Fed.
Around the turn of the year, as the period of economic weakness in the Euro area comes to an end and that in the US is just beginning, the ECB has maintained the ‘terminal rate’ throughout the period of European weakness, but as there are signs that the Fed will cut its key rate again, all of this should lead to pronounced EUR/USD strength.
We expect this strength to fade as the period of economic weakness in the US comes to an end and an end to the US rate cutting cycle becomes foreseeable. However, this scenario is unlikely before H2/2024.
Source: Commerzbank Research
Source: https://www.fxstreet.com/news/eur-usd-to-soar-toward-114-around-the-turn-of-the-year-commerzbank-202308041307