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The euro zone is in recession, MT4.MT5 financial analysis

发布时间：2022-08-25 浏览：120

On Aug. 2, Goldman Sachs downgraded its forecast for the euro against the dollar, citing challenges in the euro zone economy over the winter and an expected recession.

 

EUR/USD rebounded from falling below parity in July. Analysts believe the pair has bottomed out, but it's too early for a massive rally to take shape.

 

Zach Pandl, co-head of FX strategy at Goldman Sachs, said: “The next six months look challenging for the euro zone, which could keep the euro near parity against the dollar.”

 

Meanwhile, Goldman Sachs economists predict that the euro zone economy will slip into recession in the second half of the year. "The recent fall in the euro against the dollar reflects the outlook in this shift, and the trend is likely to expand further," he said.

 

 

 

EUR/USD has been falling since peaking at 1.2254 in May 2021. The pair has steadily moved lower since then, reaching a low of 0.9952 in July 2022 before recovering.

 

"The recent rally in EUR/USD isn't entirely justified by news flow, and the market still needs to do some work to price in our new baseline outlook," he said.

 

A number of fundamental factors have been widely cited as the reason for the EUR/USD decline in recent months.

 

The U.S. dollar started a cyclical rally in May 2021 as the market began to realize that the Fed would begin to exit quantitative easing and eventually raise interest rates. The drying up of dollar liquidity linked to these moves supported the greenback.

 

At the same time, the European Central Bank's reluctance to raise interest rates despite rising inflation means U.S. bonds and other currency assets are yielding significantly higher yields than investors holding equivalent euro zone assets.

 

Although the European Central Bank has raised interest rates, the difference with the United States is still stark.

 

The latest bout of euro weakness, triggered by the Ukraine war and related energy price spikes, has severely impacted the euro zone's economic output potential and consumer health.

 

"With Russian gas supplies well below normal, this will require some form of demand destruction," he said.

 

Economists at the Wall Street bank said that if the euro zone is to get through this winter, it will have to slash energy demand through some combination of higher prices and government policy, even when the gas tanks are full.

 

Meanwhile, commodity strategists at Goldman Sachs warned that weather-related uncertainty will be particularly high in the first half of the winter.

 

A symptom of the energy challenges facing the euro zone was a surge in baseload electricity prices in Germany over the next year on Tuesday, August 2. Prices soared above 400 euros per MWh for the first time. "We're really entering a key area of energy-intensive manufacturing in the country," said energy and commodities columnist Javier Blas. For reference, current prices are about ten times higher than 41.1 euros per megawatt-hour in 2010-2020.

 

Goldman lowered its three-month and six-month euro-dollar forecasts to 0.99 and 1.02, respectively, from 1.05 and 1.10 previously, Pandl said.