EUR/USD is trading only just below parity. Economists at Danske Bank expect the pair to head lower towards the low-0.90s.

Inflation risks are to the upside, growth risks are on the downside

“The ECB’s hike of 75 bps and its public acknowledgment of the stagflationary risks (risks to the downside for growth and to the upside for CPI), the market is likely to maintain a negative view about EUR/USD spot.”

“This stagflation theme and that higher European interest rates remain negative for the currency are well in line with our long-held USD-positive view and we have repeatedly seen such market reaction. Thus, we continue to forecast EUR/USD in the low 0.90’s.”