EUR/USD short-term forecast lifted after Fed meeting - Commerzbank

The central bank decisions of the last few days have led to something of a reshuffle. Esther Reichelt , analyst at Commerzbank noted that they have adjusted several of our exchange rate forecasts, lifting short-term EUR/USD forecast.

Key Quotes

“The FX market’s reaction following Wednesday’s interest rate decision by the Fed may have come as a slap in the face for the hawks on the FOMC. Although an imminent rate move was announced, the probability of a rate hike by year-end that is priced into the market declined slightly. After this, the US dollar depreciated on a broad front. Although the Fed has confirmed our Fed watchers’ forecast of one rate hike this year and only hesitant rate moves next year, we have therefore decided to raise our short-term EUR/USD forecast.”

“It is unlikely that the FX market will abandon its sceptical attitude towards the Fed anytime soon, or start pricing in a quicker pace of rate hikes for 2017 after the move in December. Therefore, the dollar will remain weaker for now and only appreciate when the Fed sends clear and convincing signals that it will raise rates more strongly in 2017 than in 2016.”