Commerzbank: pressure on the dollar to intensify in upcoming weeks

The decision of the last Fed meeting did not provide significant support to the U.S. dollar exchange rate. Commerzbank's economists expect the dollar to struggle in the next few weeks.

The first comments from FOMC members after the Fed meeting last week were hawkish. Markets now expect the Fed rate to exceed 5%. This means that further restrictive comments in the coming days should not come as a surprise, and should not encourage anyone to buy the dollar.

Some U.S. economic data are also getting worse now, such as the PMI. This is likely to increase scepticism that the Fed might overreact with its restrictive approach. Consequently, the key rate hike will have to be slowed even more next year, which may affect the dollar negatively.

Shortly before Christmas, liquidity in the stock market becomes scarce, and the dollar is in the spotlight, especially when weak U.S. data is released. This means that the coming weeks will be tough for the dollar.