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Euro may gain as Fed likely delivers a hawkish hold, Commerzbank says

Commerzbank’s view is that softer June inflation and lower energy prices reduce the odds of an immediate Fed hike, keeping EUR/USD sensitive to changes in rate expectations.

Reported · Written up by our desk · Major Pairs

Commerzbank analyst Antje Praefcke expects the Federal Reserve to deliver a hawkish hold, a setup that could support the euro against the US dollar, FXStreet reports.

The note says markets are already pricing at least one Fed rate hike by year end, but that recent declines in energy prices and a softer June inflation reading lower the likelihood of a near-term move, limiting upside for the dollar.

With that backdrop, EUR/USD is described as staying sensitive to any shifts in expectations for how much and how quickly the Fed will tighten.

The piece also notes the euro is trading near 1.1390 during Asian hours, while the US dollar holds back ahead of the Fed decision that is widely expected to keep rates unchanged.

Latest closeEUR/USD 1.139 ▼0.1%

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