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Jun 01 - 02:55 PM

EUR/USD: Virtually 'Unbuyable' Now Because The Tail Risks From The War Are So Big - SocGen

By eFXdata  —  Jun 01 - 01:30 PM

Societe Genearle  Research discusses EUR/USD long-term outlook.

"EUR/USD is undervalued relative to the current economic data and monetary policies, while the long-term outlook is clearly positive. The war in Ukraine and the coronavirus pandemic are both forcing a rethink in regards to fiscal policy – one that can break the deadlock which has left the ECB as the sole source of economic support over the past decade. A more active fiscal policy and an escape from super-low inflation could allow for a retreat from the negative rates that have anchored the currency. The real effective euro exchange rate has been almost 10% lower on average during the past decade than it was in the one prior to it," SocGen notes. 

"In a post-war world, EUR/USD is more likely to trade in a 1.10-35 range than the 1.03-1.26 one it has been in since the start of 2015. Despite that, we think the euro is virtually unbuyable because the tail risks from the war are so big. The EUR/USD could fall by as much in a few days if gas supplies were to be cut off, as it would rise if the war were to remain in a stalemate at the end of six months.

Source:
Société Générale Research/Market Commentary

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