EURO AT RISK OF RECORDING SIGNIFICANT LOSSES IF CORE INFLATION EASES OVER NEXT YEAR – COMMERZBANK

Further appreciation potential for EUR/USD is likely to be limited for now, in the view of economists at Commerzbank.

ECB rate expectations have gone far

“The market expects interest rates to peak at just under 4%. In our view, current market expectations are already quite aggressive. A large share of the upside risks for inflation that emerged over the past weeks is likely to be priced into the rate outlook already, which limits the Euro’s future appreciation potential.”

“In view of stubbornly high underlying inflation momentum dovish resistance within the ECB might prevent a sufficient tightening of monetary policy, in particular if core inflation tends downwards over the course of next year. If signs indicating this increase, the Euro would be at risk of recording significant losses.”