EUR-investors are likely to remain understandably cautious – Commerzbank

EUR/USD buyers struggle to keep the week-start rebound. In the view of economists at Commerzbank, investors are set to remain cautious amid the current challenging environment for the shared currency.

Euro scepticism continues 

“It is largely irrelevant for the euro whether the ECB hikes its key rate by 25, 50 or 75 bps in September. What matters instead is whether the FX market has confidence in the ECB to significantly tighten its monetary policy despite all adversities. And in that respect, the rate hikes to a final level of just under 2% currently priced in seem far from sufficient considering a rate of inflation of just under 9%.”

“The recently notoriously unreliable projections mean that the ECB wants to focus more on current developments when taking decisions. And the current environment (see inflation data) really does point towards stronger rate hikes for now. However, medium-term this is associated with the risk of the ECB quickly questioning its tightening measures once economic challenges increase.” 

“With a view to the coming winter and the threat of an energy crisis EUR-investors are likely to remain understandably cautious.”