The EUR/USD has regained its poise after the heavy losses suffered following the Russian invasion of Ukraine. While the shared currency remains vulnerable to bad news about the war and energy supply, economists at rabbank One-month forecasts for the EUR have been revised upwards across the board. However, they maintain that the value of the pair will remain lower this year than it would have been without the conflict and energy uncertainties.
Putin’s threat to respond to Western sanctions may send Europe into recession
“The President Putin’s threat to respond to Western sanctions with an energy embargo would undoubtedly send Europe into a recession scenario. In this scenario, the EUR/USD could drop past its 2020 lows in the 1.06 area and weaken substantially across the board. This would also likely take EUR/CHF below parity and EUR/GBP below 0.82. Assuming recession is averted, the EUR will clearly be for the better.”
“We maintain that the value of EUR/USD will remain lower this year than it would have been without the conflict and energy uncertainties. However, if the eurozone can avoid recession, it is likely that the EUR could maintain a range of 1.09 to 1.11 in the coming months. This suggests room for EUR/CHF to hold in the 1.03 area and for EUR/GBP to unravel towards 0.85 in a 3-6 month view.”
Source: Fx Street
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