Societe Generale Research discusses the EUR/USD outlook and maintains a bearish bias into year-end.
"Open your eyes, look up to the skies and see; Europe’s caught in a landslide: The ECB’s monetary policy matters less, than President Putin’s gas export strategy. Nordstream 1 came back online yesterday, but markets aren’t comforted. Not when even the European Commission President acknowledges that “Russia is using energy as a weapon; It is a likely scenario that there is a full cut-off of Russian gas and that would hit the while European Union”. So, the euro’s pre-ECB euro bounce after failing to break convincingly below parity with the dollar, wasn’t given further impetus by a 50bp rate hike and isn’t supported by the market now pricing a 1% discount rate by Christmas," SocGen notes.
"The big issue is that the most optimistic outcome for the rest of this year is while President Putin keeps the gas flowing, he continues to use uncertainty about how much will flow as a bargaining tool and as a means of sowing uncertainty and discord among Europe’s political elite. That still leaves the Euro, to all intents and purposes, unbuyable for the time being (probably for the rest of this year given that the leverage gas supplies afford the Russian President is at its greatest in the winter)," SocGen adds.