EUR/USD staged a rebound and tried to reclaim parity after having dropped to its weakest level in nearly 20 years at around 0.99 on Tuesday. However, the pair has retreated to 0.9950 and could fall to 0.98, economists at ING report.

Bearish bias persists

“While an improvement in the eurozone’s growth sentiment may trigger an asymmetrical upside reaction in EUR/USD, a prolonged short-term undervaluation is surely possible should gas prices remain elevated and the threat of supply shortages material.”

“Yesterday’s PMIs all but confirmed the market’s concerns about the toxic combination of high energy prices and slowing global demand, and a full inversion of yesterday’s moves may be on the cards today.”

“A drop to 0.9800 is more likely than a sustained recovery above parity in the near-term.”