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HomeFinance NewsUSD's sensitivity to non-confirming data challenges soft landing view – Commerzbank

USD’s sensitivity to non-confirming data challenges soft landing view – Commerzbank


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Some traders were uncomfortable with the EUR/USD exchange rates falling below 1.05, and Thursday’s correction of USD strength was independent of data publications. While the data did not significantly affect the decision, it does not indicate a trend reversal or the end of the USD rally. The market has heavily anticipated a soft landing for the US economy, so any data that contradicts this view may result in sensitive reactions in USD exchange rates.

As the EUR/USD exchange rates dropped below 1.05, certain traders expressed discomfort, leading to a correction of USD strength. However, this correction was not influenced by the publication of any data. Despite the lack of significant changes in the data, it is important to note that this does not point towards a complete reversal of the ongoing USD rally, nor does it suggest an end to the trend. The USD exchange rates remain sensitive as market players have primarily anticipated a soft landing of the US economy, which may result in notable reactions to data that contradicts this prevailing view.

In light of the recent correction in the USD strength, it becomes evident that a section of traders had reservations about the EUR/USD levels below 1.05. However, this correction was not driven by any significant changes in the published data. It is important to understand that this does not imply a complete reversal in the trend or the termination of the USD rally. The sensitivity of USD exchange rates persists due to the market’s strong belief in a soft landing for the US economy. Consequently, any data that deviates from this view is likely to elicit particularly responsive reactions in the USD exchange rates.

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