Commerzbank Downgrades EUR/USD Forecast Amid Fed Independence Concerns
Commerzbank has revised its EUR/USD forecast downward, attributing the change to concerns over the Federal Reserve's independence and lower US rate expectations. The bank now predicts EUR/USD will reach 1.18 by mid-2027, down from a previous estimate of 1.20, and 1.19 by the end of 2027, which was previously forecast at 1.21.
The analysis assumes that the pair will recover once tensions in the Strait of Hormuz ease, leading to increased oil supplies and reduced conflict-driven energy shocks. As a result, traders are advised to position themselves for a gradual upward shift in EUR/USD over the coming weeks by purchasing longer-dated out-of-the-money call options.
The bank also highlights the Dollar's overvaluation on a purchasing power parity basis, with the greenback remaining overvalued by more than 10%. This premium historically precedes a multi-year downward trend, making bull call spreads on the Euro attractive at current pricing.