Scotia on prospects for the euro, not a pretty picture at all:

• In Europe, the consequences of the Ukraine war remain a clear constraint on prospects.
• European energy security remains a key consideration for the outlook over the next few months. It is not in Russia’s best interests to cut off Europe altogether from its natural gas supplies and Europe is doing a decent job of building gas reserves ahead of winter. But supply uncertainty is real and surging energy costs are lifting inflation and curbing discretionary spending and industrial output.
• Recession risks are rising in the Eurozone and hot summer weather is adding to economic headwinds; low water levels are compromising key logistical routes on the Rhine (which transports around 30% of German energy raw materials).
• The European Central Bank raised interest rates 50 bps in July but markets expect only modest rate increases over the balance of the year and yield differentials will curb the appeal of the euro (EUR) for now. N
• egative growth surprises or energy supply disruption would risk pushing the EUR below parity versus the USD, we believe.
• The unsettled Italian political backdrop, prompting Moody’s to downgrade Italy’s sovereign outlook, figures as another, nascent risk for the EUR.

Where to for EUR/USD? Scotia forecasts: