In analyzing the effect of US data on USD exchange rates, Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, points out that Thursday’s correction of USD strength was not influenced by the data publications. He suggests that some traders were uncomfortable with EUR/USD levels below 1.05 and the data did not significantly change this sentiment. However, Leuchtmann clarifies that this does not indicate a trend reversal or the end of the USD rally, as the prospect of a soft landing of the US economy is still widely anticipated.
Leuchtmann emphasizes that since the market has heavily relied on the idea of a soft landing, any data that contradicts this view is likely to have a strong impact on USD exchange rates. He suggests that the market will react particularly sensitively to data that does not confirm the expected soft landing of the US economy.
Overall, Leuchtmann’s analysis highlights the market’s current dependence on the idea of a soft landing for the US economy and the potential vulnerability of USD exchange rates to data that challenges this belief.