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Commerzbank cuts its EUR/USD year-end forecast to 1.15

The bank links the shift to a temporary rebound in Fed credibility after a unanimous rate hike, which it says supports the dollar near term.

Reported · Written up by our desk · Major Pairs

Commerzbank’s Thu Lan Nguyen said the euro is likely to stay weak because the Federal Reserve’s unanimous rate hike has temporarily restored confidence in the Fed, supporting the US dollar versus the euro, according to FXStreet.

That view led the bank to lower its EUR/USD forecast for year end to 1.15 from 1.17. It still expects both the Fed and the ECB to deliver one more rate hike this year, but it expects subsequent rate expectations to be revised down.

For later, Commerzbank expects EUR/USD to rise toward 1.18 by end-2027, arguing the Fed will not tighten as aggressively as markets currently price. It also expects only one further rate hike in December, followed by unchanged rates through the end of 2027.

The bank added that the dollar could face extra pressure not only from softer US rate expectations, but also renewed concerns about Fed independence being undermined. It noted that if Iran-US relations improve and energy prices fall sharply, EUR/USD could see further downward pressure, though it would not view any resulting dollar strength as sustainable.

Latest closeEUR/USD 1.138 ▼0.6%

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