MUFG Research discusses the EUR outlook and maintains a bearish bias over the coming months.
"At the start of this month market participants have become even more fearful over downside risks to growth for European economies posed by energy supply restrictions. It follows the decision by Russia to turn off gas supplies to Bulgaria and Poland. While we do not expect Russia to turn off gas supplies to other major euro-zone economies such as Germany and Italy, the uncertainty will linger in the near-term until there is more clarity over how the stand-off over Russia’s demand to be paid in roubles is likely to be resolved," MUFG notes.
"A more disruptive than expected outcome for European gas supplies would increase the likelihood of EUR/USD falling closer to and below parity in the coming months," MUFG adds.
The euro is down 105 pips to 1.0515 today.