Société Générale says tail risk from Russia’s war on Ukraine make EUR virtually unbuyable

  • EUR/USD is undervalued relative to the current economic data and monetary policies, while the long-term outlook is clearly positive. The war in Ukraine and the coronavirus pandemic are both forcing a rethink in regards to fiscal policy -one that can break the deadlock which has left the ECB as the sole source of economic support over the past decade. A more active fiscal policy and an escape from super-low inflation could allow for a retreat from the negative rates that have anchored the currency. The real effective euro exchange rate has been almost 10%lower on average during the past decade than it was in the one prior to it,”
  • “In a post-war world,EUR/USD is more likely to trade in a 1.10-35 range than the 1.03-1.26 one it has been in since the start of 2015.Despite that,we think the euro is virtually unbuyable because the tail risks from the war are so big.The EUR/USD could fall by as much in a few days if gas supplies were to be cut off,as it would rise if the war were to remain in a stalemate at the end of six months.”
weekly candles eurusd 02 June 2022
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