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- EUR/USD: Recent gains unlikely to continue – Crédit Agricole
EUR/USD: Recent gains unlikely to continue – Crédit Agricole
EUR/USD climbed to its strongest level since early June above 1.0760 on Monday. Nonetheless, economists at Crédit Agricole CIB Research believe that the pair is unlikely to enjoy further gains.
EUR/USD is trading at a premium relative to its short-term fair value of 1.05
“We are sceptical that the recent EUR/USD gains can continue. In particular, we worry that investors risk becoming complacent about the negative impact from the European energy crisis and the ECB tightening on the Eurozone growth outlook. They may also be too confident in the growth-positive impact from the post-Covid reopening of the Chinese economy.”
“We think that investors are underestimating the Fed’s hawkish resolve in the face of a looming US recession. In turn, a more hawkish-than-expected FOMC can be detrimental for risk sentiment in a boost for the USD vs the EUR.”
“We note that the EUR is the biggest market long in G10 FX at present while EUR/USD is trading at a premium relative to its short-term fair value of 1.05.”
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