It is not of paramount importance for exchange rates how much currencies yield at the current end or close to it. What is more decisive is the yield expected long-term, in the view of economists at Commerzbank.

Fed will cut its key rate again quickly and significantly

“The market expects that following the rate hike cycle the Fed will cut its key rate again quickly and significantly. It only expects very moderate rate cuts at the end of the rate hikes. While that remains the case, any further Fed rate hike is likely to be seen as a mistake – or at least as less USD-relevant.”

“The areas below the curves of the key rate expectations are much more relevant than the position of the curve at present or in the near future. For that reason, we expect that a revision of the key rate expectations, which happens concurrently for ECB and Fed, might end up being slightly positive for the Euro.”

This article was originally published by Fxstreet.com.Read the original article here.

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