It seems that it is only a matter of time before the euro touches parity against the dollar. Scotiabank economists point out that the EUR/USD pair could extend its decline to 0.95.
High energy prices and dovish ECB should keep EUR/USD away from 1.05
“If the EU fails to sufficiently replenish gas storage for winter, we could see energy rationing and a reduction in industrial production in the euro zone -in addition to the depression of household spending with high energy costs- tipping the eurozone into recession.”
“The evolution of the next days around the probabilities of a closure of the NS1 will be decisive for a move towards parity that we believe is increasingly likely and could continue to 0.95″.
“The return to the levels prior to the maintenance of gas shipments could create a cushion to move the euro away from the parity level, but high energy prices (and remaining supply risks) and a relatively dovish ECB should continue to keep the euro on the defensive, away from 1.05“.
Source: Fx Street
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