EUR/USD: ECB unlikely to support euro, energy crisis will continue to put pressure – Commerzbank

The European Central (ECB) is likely to continue hiking its key rate significantly. However, the euro is set to continue its decline as energy crisis weighs on the shared currency, economists at Commerzbank report.

Sustainably higher levels are likely to remain difficult

“Monetary policy is unlikely to provide any support for EUR over the coming weeks as a 75 bps rate hike is more or less priced in for the next meeting.”

“The risk is more likely to be that the ECB will be more cautious than the market is expecting after all. In that case EUR would probably come under depreciation pressure. Even though we do not expect such a scenario, the market is likely to consider this risk in its evaluation of the EUR exchange rates.”

“Sustainably higher EUR-levels are likely to remain difficult in this environment. On the contrary, we continue to see the risk that EUR will weaken further as the energy crisis as a factor for uncertainty will continue to put pressure on the single currency.”