EUR/USD to remain around 1.10 if the Fed not fuel expectations of imminent rate cuts – Commerzbank

Economists at Commerzbank highlight the conditions required to keep EUR/USD around the 1.10 zone.

FX market is uncertain about the Fed's immediate outlook

Remarkably, the Dollar recovered later in the day, possibly supported by comments from San Francisco Fed President Mary Daly, who reiterated after the inflation data that the Fed has more work to do. Against this backdrop, the USD correction underscores how uncertain the FX market is about the Fed's immediate outlook.

Attention is now likely to focus increasingly on the comments of the Fed central bankers. It is their task to moderate an end of the rate hike cycle without fuelling expectations of imminent rate cuts. The more successful they are at doing that the longer EUR/USD is likely to remain in the area of 1.10.