In the case of the EUR/USD, the risks point downwards in the short-term. In the opinion of economists at Commerzbank, the euro should only start to recover when investors are increasingly betting on an end to the crisis in mid-2023.

Recession in the euro area, driven by the war of nerves over gas

“We now expect a recession for the euro area, triggered by high energy prices, in turn, a consequence of reduced gas supplies from Russia. This development is likely to weigh on the euro.”

“For 2023, we expect a partial recovery of EUR/USD when it becomes clear that Europe can meet its energy needs without Russian gas, when energy prices settle down again and when it becomes clear that the ECB resumes its rate hike cycle.”