Euro: Difficult path for gains against US Dollar – Commerzbank

EUR/USD: mildly bearish-to-neutral bias, with upside likely to be harder to sustain

The Commerzbank view points to an asymmetric setup: EUR/USD may still benefit from periods of broad US-dollar softness, but euro gains are unlikely to develop into a clean trend without a further deterioration in the US rate outlook. Recent Commerzbank commentary has emphasized that EUR/USD has been driven primarily by dollar-side expectations, while ECB tightening has offered only limited support because markets view it largely as necessary policy normalization rather than a powerful growth or yield advantage for the euro.

The immediate market mechanism is the relative interest-rate path. A hawkish ECB surprise or evidence that the Governing Council intends to continue tightening could provide a short-term lift to EUR/USD. However, if the ECB signals that further hikes are unlikely, the market may unwind remaining euro-rate expectations. Conversely, stronger US inflation or activity data would reinforce expectations of restrictive Federal Reserve policy and support the dollar. Commerzbank previously identified the ECB meeting and US inflation data as the key catalysts for a volatility increase around this period.

Trading implication:

the euro’s upside appears vulnerable to profit-taking rather than fundamentally protected by the ECB. EUR/USD could continue to rise if dollar confidence remains weak, but rallies may be shallow and sensitive to US data, Treasury yields, and changes in Fed expectations. This is more consistent with a range-bound or two-way market than with a high-conviction euro uptrend.

The main bullish interpretation for EUR/USD is that persistent dollar skepticism—linked to concerns over US policy credibility and “dollar debasement”—could overwhelm the euro’s relatively weak domestic fundamentals. The bearish interpretation is that US inflation, safe-haven demand, or higher US yields restore the dollar’s advantage, while an ECB hike that is already priced in fails to generate additional euro demand. Recent FXStreet coverage shows that the dollar has struggled to capitalize on supportive rate expectations, but that dynamic remains dependent on incoming data rather than firmly established.

What to monitor next:

ECB guidance on additional tightening, US inflation and producer-price data, US–German yield spreads, EUR/USD reaction to stronger-than-expected US data, and whether dollar weakness broadens across major currencies. A sustained euro advance would require both continued dollar underperformance and evidence that ECB policy expectations are being revised higher—not merely confirmation of an already anticipated rate increase.