The money market has lowered expectations about the extent of the rate hikes by the European Central Bank (ECB). Therefore, the outlook for the euro has worsened. Rabobank economists continue to expect the pair EUR/USD test the 2022 low at the 1.1350 zone.
The window of opportunity for ECB rate hikes could be narrow
“Due to risks to gas supply over the winter, we expect the euro zone to enter a recession in late 2022 or early 2023. This not only suggests that the window of opportunity for ECB rate hikes could be narrow But, even more worrying for euro bulls, this suggests that concerns about fragmentation in Europe are likely to increase.”
“We continue to see scope to return to year lows in the EUR/USD 1,035 area in a one to three month view.”
Source: Fx Street