EUR/USD: Downside risks dominate – Commerzbank

Two things seem to have a lot of staying power for the market at present: the covid restrictions in China and the resulting supply chain constraints and the conflict in Ukraine. Two factors that can put pressure on the euro, according to economists at Commerzbank. 

Staying power and a weak euro?

“The supply chain constraints entail the risk of inflation pressure continuing for longer than had been assumed anyway. There is also an increased risk that the continued covid restrictions will increasingly stifle growth prospects for China, thus possibly also affecting those in Europe – and that against the background of rising interest rates in the eurozone.”

“The longer the conflict in Ukraine continues and the more intense the fighting gets, the higher the risk becomes of an energy crisis as a result of a complete embargo of energy imports to Europe, also increasing the downside risk for the European economy and that of the eurozone.”