Euro: Gradual appreciation path against US Dollar – Commerzbank

Commerzbank's Chief Economist Dr. Jörg Krämer expects EUR/USD to recover once the Iran conflict eases and to grind higher over the coming quarters. Krämer links Euro strength to eroding Federal Reserve independence, falling US rate expectations and a significantly overvalued Dollar on purchasing power parity. Commerzbank's updated forecast sees EUR/USD at 1.18 by mid‑2027 and 1.19 by end‑2027.

Dollar seen weakening on Fed doubts

"The EUR/USD exchange rate should rise again after the war ends and continue to drift higher in the following quarters due to the eroding independence of the U.S. Federal Reserve, especially since the dollar is significantly overvalued in terms of purchasing power parity."

"We expect the EUR/USD rate to be 1.18 by mid-2027 (previously 1.20)."

"We expect US interest rate expectations to correct even further downward in the coming months, weighing on the dollar."

"On the one hand, inflation risks are likely to diminish with the reopening of the Strait of Hormuz, which we expect to occur by the end of the year."

"All in all, we expect a gradual rise in EUR/USD toward 1.19 by the end of 2027 (previous forecast: 1.21)."