By eFXdata — Jan 13 - 10:15 AM
Synopsis:
Despite EUR/USD starting 2025 under pressure due to economic and policy divergence, Credit Agricole argues that parallels to the energy-driven lows of 2022 are unwarranted.
Key Points:
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Economic and Policy Divergence:
- European economic concerns, coupled with potential US trade tariffs, have underscored cyclical and policy divergence.
- A dovish ECB contrasts with a more neutral Fed, weighing on EUR/USD.
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Energy Concerns vs. 2022:
- Rising European gas prices, driven by reduced Russian supplies and falling storage levels, mirror past fears but lack the same disruptive potential.
- Sovereign credit risks tied to energy markets are less likely to resurface compared to three years ago.
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Relative Valuation Support:
- EUR/USD appears undervalued based on relative commodity terms of trade between the Eurozone and the US, providing a buffer against further downside.
Conclusion:
Credit Agricole believes comparisons to 2022’s EUR/USD lows are overblown, citing diminished systemic energy risks and improved relative valuation metrics as stabilizing factors.
Source:
Crédit Agricole Research/Market Commentary