Euro: Limited gains from ECB tightening – Commerzbank

Commerzbank's Thu Lan Nguyen asserts that the EUR/USD exchange rate is primarily influenced by the US Dollar, with Euro-side developments only serving to accentuate or mitigate trends. The Euro's growth from past and anticipated ECB rate hikes has been minimal, as markets perceive these hikes as essential to rectify an excessively low policy rate and maintain the Euro's value, rather than significantly enhancing it.

Moreover, the impact of the ECB meeting this week has been limited, primarily driven by developments on the US Dollar side, which continues to dictate the exchange rate direction. The Euro has only modestly benefited from both the ECB's recent rate hike and the additional tightening expected this week. This modest growth may be attributed to the market's belief that the ECB's previous policy rate was too low, viewing the ECB's monetary tightening primarily as a means to preserve the Euro's value rather than substantially increase it.