Economists at Commerzbank analyze EUR/USD outlook after adjusting their ECB projections.
ECB likely to hike one more time
We have adjusted out ECB projections and now expect a rate hike in July. We do not, however, expect a further rate step in September.
We assume that the ECB will keep its rates at the level of 3.75% reached at that point for a long time. Contrary to the market, as the first rate cuts are being priced in there for next year.
Against this background, we now feel even more comfortable with our projection of EUR/USD levels around 1.14 by year-end. Even if there is a certain potential for disappointment regarding the September meeting as the market prices in a rate hike at quite a high likelihood the market will have to abandon its expectation of a rate cut, which should support EUR in the end.
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