EUR/USD to slump below parity on severe energy supply disruption – Scotiabank

The euro failed to benefit from the European Central Bank’s (ECB) surprise 50 bps hike in July. Negative growth surprises or energy supply disruption would risk pushing the EUR/USD below parity, economists at Scotiabank believe.

Downside risks remain amid uncertainties

“Economic prospects remain questionable, given the risk of high energy prices disrupting discretionary spending or, worse, curtailed natural gas supplies from Russia.”

“In the event of severe energy supply disruption, EUR losses are likely to extend below parity.”

“About the only thing in the EUR’s favour is that markets are already aggressively short the currency.”