The euro is under intense downward pressure both as a hedge against war risk, downwardly revised growth and earnings expectations, and, possibly, rising portfolio outflows. According to economists at ANZ, EUR/USD may fall into a 1.00-1.05 range.
EUR/USD could fall to 1.00-1.05
“The euro’s exchange rate is falling, owing to the EA’sproximity to the conflict, energy dependency on Russia, falling real interest rates, diminished expectations of monetary tightening and elevated economic uncertainty.”
“Price action in financial assets and the exchange rate suggests portfolio outflows from the region may be rising.”
“The euro’s exchange rate provides a liquid way of hedging Russia-Ukraine risk, and the heightened threat or the use of nuclear weapons hanging over Europe at present is an added headwind for the currency.”
This euro weakness may run further, near-term, and EUR/USD could conceivably test 1.05 or lower as the conflict intensifies.”
“EUR weakness will also add to inflationary pressures as most commodities are priced in US dollars.”