USD: December will probably be very important - Commerzbank

I think that the easing of tensions on the trade front is good for everyone involved. This includes central banks, which may now have the opportunity to set their monetary policy in a somewhat less uncertain environment. I would like to point out one aspect in particular. The introduction of US tariffs was also heavily criticized in the US itself, and their legal basis was questioned. The US Supreme Court is reportedly set to hear arguments today on the legality of the emergency tariffs introduced by US President Trump. However, a final decision is not expected before spring 2026, cs FX analyst Antje Praefcke notes.

Market has not yet dared to go beyond 1.1480

"Last week, I wrote that a surprise from the Fed and therefore a reassessment of the USD level was unlikely. At least the Fed was surprisingly less dovish than most had expected, forcing the market to adjust its interest rate cut expectations and allowing the USD to appreciate. These adjustments were not yet strong enough to finally break through far beyond the 1.15 mark - the market has not yet dared to go beyond 1.1480. In my opinion, important US data would have to underpin a reassessment. However, this data is still missing due to the shutdown."

"After all, the increasing disagreement within the FOMC is making it increasingly difficult for the market to price in even fewer interest rate cuts, which is why the dollar is struggling to make further gains. A weaker USD is probably going to happen faster anyway, as this seems to be the "easier" option, i.e., the risks are asymmetrically distributed. This was evident on Monday, for example, when the US ISM index for October fell from 49.1 to 48.7 points. The manufacturing sector in the US is clearly struggling to get out of the doldrums. Without further important data, especially from the labor market, which clearly points to a stronger dollar, it will be difficult for the USD to see stronger gains towards levels significantly below the 1.15 mark in EUR/USD."

"Against this backdrop, the Fed meeting in December will probably be very important, when hopefully more data will be available and the corresponding opinions of the FOMC members will be more substantiated or indicative and the forecasts more precise. As soon as the shutdown is over, more data will be available and the market will quickly form its own picture. Let's hope that will be soon. But what the Fed will ultimately do with this information at the end of December is another matter entirely. This is going to be really exciting."