Euro: Gradual appreciation path against US Dollar – Commerzbank
Commerzbank's Chief Economist Dr. Jörg Krämer expects EUR/USD to recover once the Iran conflict eases and to grind higher over the coming quarters.
Commerzbank's Chief Economist Dr. Jörg Krämer anticipates the Euro will gradually appreciate against the US Dollar once the Iran conflict subsides and continue to rise over the coming quarters. Krämer attributes the Euro's strength to the Federal Reserve's waning independence, waning US rate expectations, and the Dollar being significantly overvalued in terms of purchasing power parity.
The bank's revised forecast predicts EUR/USD will reach 1.18 by mid-2027, and 1.19 by the end of the year. Krämer believes the USD will continue to weaken as the Federal Reserve loses independence, particularly due to the Dollar being overvalued on PPP. Inflation risks are expected to decrease with the reopening of the Strait of Hormuz, slated for late 2023.
Overall, the bank expects a steady rise in EUR/USD to 1.19 by year-end, slightly lower than their previous forecast of 1.21.
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