Commerzbank: If a lasting peace agreement is reached between the US and Iran, the euro may not benefit

Commerzbank analyst Michael Pfister stated that given the stronger correlation between oil prices and inflation expectations in the Eurozone compared to the US, the euro may not benefit if the US and Iran reach a lasting peace agreement. "Although the Federal Reserve's interest rate expectations have recently decoupled from oil price trends, the European Central Bank's interest rate outlook remains linked to inflation risks." Earlier this month, when oil prices rose again, one-year inflation expectations in the Eurozone climbed accordingly, while US inflation expectations fell. Pfister pointed out that market expectations for Federal Reserve rate hikes appear overly aggressive, and it remains unclear whether these expectations will change if oil prices drop. He believes that until this expectation shifts, the euro is unlikely to appreciate against the US dollar.