Societe Generale Research discusses EUR/USD outlook and maintains a bearish bias targeting the pair at 0.97 by the end of Q3.
"We have argued before, that a complete cut in gas inflows from Russia to Germany would be devastating for growth, triggering a recession, and sending EUR/USD, to 0.90-0.95. We are not quite at that point yet, but the risk is now clear enough that policymakers and markets have reacted," SocGen notes.
"The policy response will slow growth but helps soften the impact of a further reduction in flows from here. That makes a sustained break below EUR/USD likely, but it suggests we will see EUR/USD slip into a 0.95-1.0 rather than even lower. We’ve revised our forecasts accordingly, with Q3 at 0.97 and Q4 slightly higher," SocGen adds.