ING Research discusses the current drivers behind EUR/USD downside.
"If we were to pick out two big drivers keeping EUR/USD depressed right now we would say: i) 2 year EUR:USD swap spreads at their widest of the year and ii) the eurozone's terms of trade near its lows for the year as natural gas prices continue to tick higher," ING nptes.
"On the former, there seems no compelling reason to expect swap spreads to narrow in favour of EUR/USD anytime soon. The bigger risk looks to be the market pricing more into the Fed cycle, where the policy rate is only priced now at 3.38% for the December meeting. This can easily move higher. Regarding gas prices, Gazprom seems intransigent in its view that a key turbine cannot be put back into use to improve gas supplies to Europe - which really should not be a surprise given events in Ukraine. EUR/USD looks soft towards the lower end of a 1.0100-1.0300 range and could easily sink back to parity at any time," ING adds.