Fed independence concerns and overvalued USD drive expected long-term euro appreciation, revised forecasts show.
Commerzbank revised its EUR/USD forecast, projecting the pair at 1.19 by the end of 2027, down from a prior 1.21 estimate. The adjustment follows expectations of eroding Federal Reserve independence and a significantly overvalued dollar on purchasing power parity terms.
The bank anticipates the euro will recover once the Iran conflict eases, with further support from declining US rate expectations. Mid-2027 forecasts were also lowered to 1.18 from 1.20, reflecting softer inflation risks tied to geopolitical developments.
Dollar weakness is linked to Fed policy doubts and a correction in US interest rate expectations over the coming months.