Euro Poised for Gradual Appreciation Against Dollar Amid Policy Divergence

Commerzbank analysts are forecasting a gradual appreciation of the euro against the US dollar over the coming months. The bank points to the European Central Bank (ECB) and the Federal Reserve approaching a crossroads in their policy cycles, with the Fed expected to cut rates while the ECB may hold steady or even tighten further.

This policy divergence is seen as a key driver of the euro's gradual appreciation path. As of mid-2025, the Fed has signaled potential rate cuts in response to cooling US inflation, while the ECB remains cautious about easing due to persistent price pressures in the euro area.

The euro has already shown resilience in recent weeks, trading in a range against the dollar as investors digest mixed economic data from both sides of the Atlantic. Commerzbank's view adds to a growing consensus among some banks that the dollar's strength may be peaking.