EUR/USD is trading at weak levels. In the opinion of economists Commerzbankeuro exchange rates may be reflecting market doubts about whether the European Central Bank (ECB) will raise interest rates soon.
Doubts in the takeoff of the ECB?
“The end of Russian gas supplies to Poland and Bulgaria is likely to have heightened concerns that Russia could stop supplying gas to other EU countries and, in an extreme case, to the entire EU. If we were to see a complete end to supplies, a lift-off in the Eurozone is likely off the agenda. At the same time, inflation is likely to remain high.
“High levels of inflation, as well as the risk of economic weakness, which could lead to the ECB not taking action, are putting downward pressure on the EUR“.
“If the FX market were more certain that the ECB would fight high inflation, the EUR would probably benefit. However, as long as the risk of an energy crisis exists, aggressive comments from ECB members will do little to overcome any doubts.
Source: Fx Street
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