Commerzbank’s Antje Praefcke argues that the Dollar remains hard to beat as markets await a peace agreement and clarity on US politics and inflation. Strong US data and hawkish FOMC commentary are seen supporting the USD, but she doubts much further upside. EUR/USD could revisit 1.13, yet she finds further sustained Dollar gains toward 1.10 unlikely.

Dollar strength capped by Fed doubts

"Because I think that if US economic data comes in strong, expectations for a US interest rate hike by the end of the year will be kept alive for the time being - and this, along with hawkish comments from various FOMC members, will support the USD."

"Still, I don’t see much more upside potential for the US dollar. After all, to price in even more rate hikes, the data would have to be truly exceptional and surprise on the upside across the board. That’s unlikely, partly due to the energy price shock. "

"Certainly, we could see EUR/USD move toward 1.13 again - especially if tomorrow’s US jobs report comes in stronger than expected and boosts confidence that the labor market has overcome its slump from the fall."

"But in the absence of new, truly decisive information, I find it hard to imagine further gains toward 1.10."

"We have our doubts about this and, as a result, see potential for a correction in the dollar."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)