EUR/USD: There will likely be a deadlock for now – Commerzbank

EUR/USD remains to trade below the 0.99 mark. Economists at Commerzbank note that there is a deadlock in the world's most popular currency pair.

The speed od Fed rate hikes will ease somewhat

“It should not come as a complete surprise that the FOMC is beginning to refer to the fact that the steps will be smaller as of December and this should not put much pressure on the dollar. However, that also means that monetary policy will not provide further support for the dollar, but that this argument has now been sucked dry.”

“ECB members have signaled that a recession should not prevent the central bank from pursuing its normalization process though. In view of very high inflation rates, it would be necessary to act much more decisively as otherwise inflation expectations risk becoming de-anchored. In case of too hesitant an approach, there was a risk of monetary policy having to be tightened more severely at a later stage, which makes a hawkish rate decision on Thursday likely.”

“There will likely be a deadlock in EUR/USD for now with the euro standing up well against the dollar as long as there is no surprise news on the monetary policy or geopolitical front. At present, the latter seems more likely.”