Commerzbank\u2019s Thu Lan Nguyen says EUR\/USD gains may be limited in the short term because markets may be pricing in too strong an ECB response to the latest inflation shock. She adds that FX markets are likely to focus on near-term central bank reactions.<\/p>\n
She notes the euro and the British pound have been steadier against the US dollar than in 2022, linked to expectations of faster policy tightening by the ECB and the Bank of England. She also states that the bank has previously questioned market expectations for the ECB, which limits the scope for further EUR\/USD rises over the near term.<\/p>\n
Over a longer horizon, she says currency performance may depend on which economies return towards the 2% inflation goal faster. She points to risks for the US dollar, citing firmer inflation related to rises in import tariffs and the possibility that actions by the US government could restrict the US central bank\u2019s ability to respond to an inflation shock.<\/p>\n
The article notes it was produced using an AI tool and checked by an editor.<\/p>\n
In the immediate term, we see limited upside for EUR\/USD as the market has likely gotten ahead of itself. Expectations are high that the European Central Bank will react aggressively to the latest inflation shock. This sentiment is capping any significant gains for the Euro against the Dollar.<\/p>\n
The latest Eurozone inflation data for March showed a reading of 3.1%, fueling bets for quicker policy tightening. However, recent commentary from ECB officials has remained cautious, highlighting risks to economic growth and stressing a data-dependent path. This suggests the market’s hawkish positioning may be premature, creating an opportunity for traders.<\/p>\n
Derivative strategies that profit from EUR\/USD staying within a range or drifting slightly lower could be effective in the coming weeks. Selling out-of-the-money call options or establishing bear call spreads could capitalize on the view that the Euro’s rally is overdone for now. These positions would benefit if the currency pair fails to break through key resistance levels.<\/p>\n
This is a stark contrast to the environment we saw back in 2022, when markets were confident the US Federal Reserve would lead the charge against inflation. Today, markets seem to trust the ECB and Bank of England to have learned from the past and to act more swiftly. This belief is what has helped support the Euro and Pound recently.<\/p>\n
Looking beyond the next few weeks, however, we believe the dollar faces more substantial risks. US inflation has remained stubbornly firm, with the latest core CPI coming in at 3.5%, partly due to significant import tariffs introduced last year. Over the long term, currencies where inflation returns to the 2% target more quickly will prove to be the most robust.<\/p>\n","protected":false},"excerpt":{"rendered":"
Commerzbank\u2019s Nguyen warns EUR\/USD upside limited as markets overprice ECB reaction; near-term focus remains central-bank responses.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-45365","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45365","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=45365"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45365\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=45365"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=45365"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=45365"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}