Dollar Strengthened as Commerzbank Trims EUR/USD Forecast

The Federal Reserve's unanimous decision to raise interest rates has boosted confidence in the central bank and strengthened the US dollar. Commerzbank, a major German bank, has trimmed its EUR/USD year-end forecast to 1.15 from 1.17 as a result of this development.

While both the Fed and European Central Bank are expected to deliver one more rate hike this year, markets may be overestimating the extent of future tightening. Commerzbank anticipates that US rate expectations will be revised down as inflation pressures ease next year, potentially leading to Fed rate cuts by 2027.

The bank projects only one further rate increase in December, followed by unchanged rates through the end of 2027. Based on this forecast, EUR/USD is expected to rise towards 1.18 by 2027 as the dollar faces greater pressure than the euro. However, any improvement in US-Iran relations or a sharp decline in energy prices could lead to a temporary dip in the pair.