The euro has pulled back toward 1.16 against the dollar as traders sharply reduced European Central Bank rate hike expectations from four full moves down to roughly 70 basis points total. Commerzbank analyst Pfister has identified three potential pathways for EUR/USD to climb higher in the coming weeks despite this repricing. The downward revision in ECB tightening bets has pressured the single currency lower as the interest rate differential between the eurozone and United States narrows less than previously anticipated.
The analysis comes as currency markets reassess the monetary policy divergence between major central banks, with implications for carry trades and funding decisions. Traders and brokers positioning in euro pairs should monitor whether any of Commerzbank’s outlined scenarios materialize, as this could trigger significant moves from current levels around 1.16.
FXnCO Insight
Watch for catalysts that could revive hawkish ECB expectations or weaken dollar sentiment, as these represent the most likely triggers for EUR/USD upside from oversold technical levels.
Source: FXStreet