EUR/USD: Return to lasting peace in Ukraine to lay the groundwork for a rally to 1.30 – SocGen

In the near-term, the euro outlook is still all about the evolution of the conflict in Ukraine. The EUR/USD pair could move back to 1.30 on a return to lasting peace while a test of parity would be seen on a significant interruption to gas flows, economists at Société Générale report. 

Rates market has priced in so much Fed tightening

“A significant interruption to gas flows could take EUR/USD back below 1.05, testing parity.”

“A return to lasting peace and a shift in European fiscal policy would lay the groundwork for an eventual move back to EUR/USD 1.30.”

“Our forecasts are less ambitious, looking for a modest decrease in tensions and a gradual turn higher in EUR/USD now that the rates market has priced in so much Fed tightening.”