EUR/USD to collapse if Russia-Ukraine conflict spreads to Europe – Natixis

Could the euro’s exchange rate collapse? Economists at Natixis do not believe so, at least if the Russia-Ukraine conflict does not spread to European Union countries. 

Clear monetary policy divergence between the US and the eurozone

“We should expect a marked monetary policy divergence between the United States (interest rate hikes, shift to a policy of reducing the central bank's balance sheet) and the eurozone (whatever the ECB may still say, no marked monetary policy tightening). The financial markets do not yet fully expect this divergence, so the euro will depreciate further against the dollar.”

“If the conflict does not spread to Europe, however, we should not expect the euro to collapse, due to the excess savings of the eurozone and the solid international demand for euro-denominated assets (except very temporarily at the outbreak of the war in Ukraine), due to the structural strengthening of Europe.”