Commerzbank’s Volkmar Baur notes EUR/USD has been stuck between 1.1350 and 1.1450 since mid-June, with few catalysts expected over the summer. He highlights that the European Central Bank (ECB) is likely to delay its next rate hike to September and that the Federal Reserve (Fed) is also unlikely to deliver clear signals, which should limit US Dollar (USD) strength and gradually support the Euro (EUR) into next year.

Rangebound pair awaits autumn drivers

“Since mid-June, EUR/USD has been fluctuating between 1.1350 and 1.1450, and one is slowly getting the feeling that this could continue for a while longer.”

“It therefore seems probable that the ECB will leave the key interest rate unchanged, while at the same time making it clear that another rate hike is possible but not yet certain.”

“As for the Fed, the market is currently still pricing in slightly more than one rate hike by year-end. In September, Kevin Warsh will have to say a bit more than just “task force” when asked about the economic situation. We continue to expect that he will not raise interest rates – a development that is likely to weigh on the dollar.”

“And the closer we get to next year, the stronger the support for the euro is likely to become. Yesterday’s German industrial orders data showed that a cyclical recovery is slowly taking shape. Structural reforms and expansionary fiscal policy should also help Germany and Europe grow faster next year.”

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