EUR/USD has significant recovery potential if the ECB delivers fewer rate cuts than expected – Commerzbank

The Euro (EUR) has suffered from the recent dovish talk of ECB policymakers. Economists at Commerbznank analyze how ECB decisions could impact the shared currency.

The ECB would jeopardize the success of past monetary tightening if it were to cut rates prematurely

The ECB would jeopardize the success of past monetary tightening if it were to cut rates prematurely, because in hindsight it would be seen as a tactic rather than a reflection of a fundamental stance. 

This is why the Euro has suffered so much from the recent dovish talk of ECB policymakers. And it is also why it has significant recovery potential if the ECB delivers fewer rate cuts than the market is currently pricing in.