EUR/USD has managed to regain parity again. Talk of a 75 basis point rate hike from the European Central Bank (ECB) and positive energy developments in Europe have supported the single currency. However, the Credit Suisse economists maintain their target of 0.9700 for EUR/USD at the end of the third quarter.
Positive evolution of the European energy markets
“We recognize that if the ECB is serious about 75 basis point rate hikes, and if the EU is serious about resolving energy difficulties, then two of our key reasons to be bearish on EUR/USD (the rate spread dynamics and Europe’s energy malaise) are somewhat weakened.”
“Even so, what doesn’t change is the terms-of-trade impact of still-high gas prices on the eurozone’s current account position. Nor the risk of further Russian gas supply cuts in the coming months. Nor the risk of increased risk aversion in euro prices after the Italian elections on September 25 if a new right-wing government has difficulties negotiating the budget with the EU.”
“So while our 0.9700 target for EUR/USD at the end of Q3 may take longer to hit, we are in no rush to change our main bearish message just yet.”
Source: Fx Street
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