US Dollar’s rally will come to a natural end soon – Commerzbank

The US Dollar (USD) has risen sharply in recent days. Economists at Commerzbank analyze Greenback’s outlook.

The end of the USD rally?

If the overall picture of aggressive rate cuts is priced into the G10 universe, the US Dollar is the currency that should benefit the most. And that is exactly what has happened. But such a process has a natural end. 

Soon, assuming that the general picture remains the same: that central banks will start to cut rates at some point in the foreseeable future and that the Fed will continue to be one of the more active G10 central banks. Over time, this effect may be more or less pronounced. But as long as this remains the scenario that the market is pricing in, we are talking about two or three cents (in EUR/USD terms), not much more.

The fact that EUR/USD is more comfortable in the 1.0900 area today than in the mid-1.0800 area may already be due to this.