EUR/USD has turned south and declined below 0.9700. In the opinion of Kit Juckes, Chief Global FX Strategist at Société Générale, the pair is set to post a new cycle low.

Inflation problem and economic threat from Russia to weigh on the EUR

“A new cycle low in EUR/USD seems certain, and 0.95 is unlikely to hold.”

“The early signs from the Laender suggest the risk is of an overshoot to the consensus for German CPI inflation, which looks for a rise from 7.9% to 9.5%. Meanwhile, the leading German Institutes forecast a 0.4% fall in GDP next year, which is slightly below the -0.2% consensus figure.” 

“The rates market will price in further ECB hikes and ECB representatives will talk tough, but a growing inflation problem at the same time as the economic threat from Russia, will weigh on the euro.”