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.
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