EUR/USD: Path towards 1.16 will take much longer – Commerzbank

What will EUR/USD do in case of a US recession? Economists at Commerzbank still expect the pair to reach the 1.16 level but it will take much longer than expected.

US dollar to ease significantly in 2023

“The continued risks of a recession are likely to put continued pressure on the euro for longer than previously assumed in this new central scenario. As a result, we have postponed the recovery of EUR.”

“If the Fed lowers its key rate again in 2023, but not the ECB, the US dollar’s real interest rate advantage will disappear and thus the main reason for the USD strength which we have been seeing for more than a year now. We therefore expect (now for 2023 and no longer for 2022) the US dollar to ease significantly.”

“We still left our target for EUR/USD at 1.16, but expect that it will take much longer until EUR/USD will reach this target.”