EUR/USD: Bearish, seen trading in the 0.9400/1.0200 range over next weeks – MUFG
18.10.2022, 16:15

EUR/USD: Bearish, seen trading in the 0.9400/1.0200 range over next weeks – MUFG

Analysts at MUFG Bank see the EUR/USD with a bearish bias for the next weeks, trading in the range 0.9400/1.0200. They war the risk/reward balance for the pair moving lower is becoming less complelling. 

Key Quotes:

“The deteriorating growth outlook in the euro-zone is not sufficient yet to shift the ECB’s focus from fighting upside risks to inflation. The latest CPI report revealed that headline inflation moved into double digits in September.”

“ECB policymakers have sent a clear signal that they want to lift rates back towards neutral territory (around 2.00%) by the end of this year. They are also set to begin discussions over shrinking their balance sheet by allowing maturing asset holdings to roll off, although those plans are unlikely to be implemented until the 1H of next year. Overall, the developments still favour holding a bearish EUR bias for the month ahead but the risk/reward balance is becoming less compelling.”

“The main upside risk to our bearish EUR/USD bias could be triggered by a further paring back of more acute energy supply concerns in Europe. If the price of natural gas continues to fall/settles at much lower levels over the winter it could help to ease fears over an even sharper slowdown for the euro-zone economies. At the same time, the EUR could strengthen more than expected if the ECB keeps raising rates at a faster pace while the Fed signals that is considering slowing hikes helping to further narrow expectations for monetary policy divergence.”
 

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