EUR/USD: The growth/inflation mix is a key headache for the Euro – HSBC
|The Euro could face the double whammy of stagflation fears against a “safe-haven” USD over the near term, economists at HSBC report.
Not all fundamentals are against the EUR
The main headache for the EUR is the unpleasant growth/inflation mix, that the Eurozone economy faces.
The Eurozone activity data disappointments continue to mount, while US activity data still surprise on the upside. We think that stagflation fears in the Eurozone vs growth resilience in the US would probably point to lower EUR/USD over the near term.
If geopolitical tensions rise further in the Middle East, the EUR could also face downward pressure against a ‘safe-haven’ USD.
On a positive note, the EUR’s structural allure is supported by the improvement in the Eurozone’s current account, together with supportive financial flows, compared to the US’s sizeable twin deficits.
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