Most recently, our Fed expectations were largely in line with those of the market. Just like the market, we expect the Fed to lower its key rate to around 3½%. Therefore, there is little to be said for idiosyncratic USD strength. However, we had previously expected the ECB to cut its key rate by far less than the market expects. This is no longer the case, Commerzbank’s Head of FX and Commodity Research Ulrich Leuchtmann notes.

EUR/USD target us lowered from 1.15 to 1.11

“Part of the current USD strength is certainly due to the fact that Donald Trump's chances of returning to the White House have increased in view of recent polls. Since Trump's tariff and tax policies are widely expected to have an inflationary effect, the new polls are likely to have contributed to the recent dollar strength. In the event of Kamala Harris's election victory, there is thus potential for a setback for the dollar. From today's perspective, weighing up the risks, a slight weakening of the dollar appears to be the more likely scenario for the coming months.”

“In the US, GDP in Q4 2025 will be 1.9% higher than in the same quarter of the previous year – after 2.3% in Q4 2024. This means that the US would continue to grow significantly faster, but not quite as much faster as at present. However, because the US growth advantage is likely to have been responsible for a good part of the USD strength so far, even a small reduction in this US advantage is a rather good signal for the Euro.”