EUR/USD: Break below parity could continue into the mid-0.90s – Scotiabank

It seems it is only a matter of time for the EUR to touch the parity mark against the USD. Economists at Scotiabank note that the EUR/USD pair could extend its slump into the mid-0.90s.

High energy prices and dovish ECB should to keep EUR/USD away from 1.05

“If the EU fails to sufficiently replenish gas storage ahead of winter, we could see energy rationing and a reduction in Eurozone industrial output – further to depressed household spending with high energy costs – that tilts the Eurozone into recession.” 

“Developments over the next few days around odds of a NS1 shutoff will make or break a parity move that we think is increasingly likely and could continue into the mid-0.90s.”

“A return to pre-maintenance levels of gas shipments could build a buffer away from the parity mark for the EUR, but high energy prices (and remaining supply risks) and a relatively dovish ECB should still keep the EUR trading on the defensive, away from 1.05.”