CORRECTED-LIVE MARKETS-Postponed dollar weakness

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POSTPONED DOLLAR WEAKNESS

Before the Iran war, rumblings of dollar weakness and questions about the greenback’s safe-haven status were common.

But the conflict quickly halted that narrative, with the dollar sharply strengthening against some major currencies like the euro.

But what happens after the war?

“It is expected that once the war in Iran ends, the USD's strength will correct, and EUR-USD will subsequently rise,” according to Thu Lan Nguyen, head of FX and commodity research at Commerzbank.

When the war ends, “upward potential in the short term is likely to be constrained by faster declines in yields in the euro zone compared to the U.S.,” Nguyen said. Commerzbank expects the war to end in May.

But later in the year, Commerzbank expects the Federal Reserve to return to its rate-cutting cycle, while the ECB implements a hike.

“As a result, we expect EUR-USD to rise further to 1.22 next year,” Nguyen said.

Dollar weakness is further supported by continuing concerns over Fed independence and the greenback’s vulnerability to correction as it is currently overvalued relative to the euro, she noted.

(Sophie Kiderlin)

EARLIER ON LIVE MARKETS:

A SHARPER US TREASURY SELLOFF IN TOKYO CLICK HERE

STOXX 600 HEADS FOR BIGGEST MONTHLY FALL SINCE JUNE 2022 CLICK HERE

EUROPE BEFORE THE BELL: FUTURES HIGHER ON IRAN DE-ESCALATION SIGNS CLICK HERE

SOME RESPITE FOR NERVY MARKETS AFTER BRUTAL MONTH CLICK HERE