Commerzbank’s Antje Praefcke states that the US dollar remains resilient, supported by strong US economic data and hawkish commentary from various FOMC members, as markets await developments regarding a peace agreement, US politics, and inflation trends [1]. Praefcke notes that expectations for a US interest rate hike by the end of the year are being kept alive due to these factors, which continue to underpin the dollar’s strength [1].
However, Praefcke expresses skepticism about the potential for further significant upside in the US dollar, arguing that for the market to price in additional rate hikes, economic data would need to be exceptionally strong and consistently surprise to the upside, which she considers unlikely, partly due to the energy price shock [1]. She suggests that while EUR/USD could revisit 1.13, especially if the upcoming US jobs report exceeds expectations and boosts confidence in the labor market’s recovery, sustained gains toward 1.10 are improbable without new, decisive information [1].
Praefcke concludes that there is potential for a correction in the dollar, as the current environment does not support further substantial appreciation unless there are unexpected positive surprises in US data [1].
CONCLUSION
Commerzbank anticipates that while the US dollar may remain supported in the near term, its upside is likely capped unless economic data significantly exceeds expectations. The potential for a correction exists, with EUR/USD possibly revisiting 1.13 but unlikely to see sustained moves toward 1.10 without new catalysts.