Analysis Report: Commerzbank's Dollar Forecast and Fed Political Pressure Impact

On November 18, 2025, the Wall Street Journal reported that Commerzbank expects the U.S. dollar to face significant pressure in the coming year if the Federal Reserve cuts interest rates more than expected due to political pressure [1]. The bank’s analysis highlights that aggressive Fed rate cuts, combined with a stable European Central Bank (ECB) policy, could lead to a sustained break above the 1.18 level for the EUR/USD exchange rate [3].

The U.S. Dollar Index (DXY) fell 0.15% to 99.4361 on November 18, 2025, reflecting initial market reaction to rate-cut uncertainty [2]. Rate-sensitive sectors underperformed:

• Technology: -1.66%
• Financial Services: -0.83%

Defensive sectors showed mild gains, with Communication Services up 0.13% [0].

• Commerzbank
  : EUR/USD could break 1.18 if the Fed implements further significant cuts while the ECB maintains policy [3].
• BNP Paribas
  : Expects the Fed to cut rates to 3.25% by end-2026 (1 Dec 2025 cut + two 2026 cuts) due to labor market deterioration and political pressure, with a 12-month EUR/USD target of 1.24 [4].

Near-term dollar support remains (traders don’t expect a Dec cut [5]), but long-term sentiment is bearish amid growing political pressure on the Fed.

Metric	Value	Source
DXY (Nov18,2025)	99.4361	[2]
DXY Day-over-Day Change	-0.15%	[2]
DXY Year-over-Year Change	-6.28%	[2]
Tech Sector Change	-1.66%	[0]
Financial Services Change	-0.83%	[0]
Market Priced Fed Easing (Year-End)	~17bp	[4]
BNP’s 12-Month EUR/USD Target	1.24	[4]

• U.S. Dollar Index (^DXY)
• EUR/USD exchange rate

• Vulnerable
  : Rate-sensitive sectors (Technology, Financial Services)
• Resilient
  : Defensive sectors (Communication Services, Utilities)

• Treasury yields (likely to fall with rate cuts)
• U.S. exporters (benefit from weaker dollar)
• Import-dependent companies (face higher costs)

• Detailed breakdown of Commerzbank’s dollar forecast (magnitude of potential fall)
• Specific scenarios for Fed rate cuts beyond 2025
• Commerzbank’s full report on the topic

• Users should be aware that political pressure on the Fed to cut rates more aggressively than economic fundamentals warrant could significantly impact the dollar’s value and rate-sensitive sectors [1][3][4].
• This development raises concerns about Fed independence—a key pillar of dollar stability—which warrants careful consideration [3][5].

• Fed’s December 2025 meeting decision
• U.S. labor market data (once government reopens)
• Political statements on Fed policy
• EUR/USD movements relative to the 1.18 threshold
• Sector performance trends (Technology vs. Defensive)

[0] Ginlix Analytical Database (get_sector_performance tool)
[1] Wall Street Journal. “Dollar Could Fall Sharply if Fed Bows to Political Pressure to Cut Rates”. URL: https://www.wsj.com/articles/yen-consolidates-as-traders-digest-japanese-finance-ministers-concerns-ed7c5d72 (2025-11-18)
[2] TradingEconomics. “United States Dollar - Quote - Chart - Historical Data - News”. URL: https://tradingeconomics.com/united-states/currency (2025-11-18)
[3] CurrencyNews.co.uk. “Euro to Dollar Forecast: Can EUR/USD Break 1.18 as Fed Cut Bets Grow”. URL: https://www.currencynews.co.uk/forecast/20250912-44019_euro-to-dollar-forecast-can-eur-usd-break-1-18-fed-cut-bets-grow.html (2025-09-12)
[4] BNP Paribas Wealth Management. “Currencies Focus - November 2025”. URL: https://wealthmanagement.bnpparibas/en/insights/market-strategy/currencies-focus-november-2025.html (2025-11)
[5] Morningstar. “Correction: Fed Vice Chair Says Economic Trade-Offs Justify Gradual Rate Cuts”. URL: https://www.morningstar.com/news/dow-jones/202511184116/correction-fed-vice-chair-says-economic-trade-offs-justify-gradual-rate-cuts (2025-11-18)

: This analysis is for informational purposes only and does not constitute investment advice. All data is sourced from credible third parties, but no guarantees are made regarding accuracy or completeness.