In the absence of the risk of a Europe-specific energy crisis and recession things are looking quite rosy for the European single currency, according to economists at Commerzbank. However, sanctions against Russia are set to cap the EUR/USD pair below the 1.11 level.

Euro between sanction risks and ECB about turn

“More sanctions mean that the risk of energy disruptions in Europe rises. Of course, things look fundamentally different for the US side. An economy that can largely provide its own energy is much more robust.”

“The risk of significant euro weakness increases. That is why it is so difficult at present for EUR/USD to establish itself in the area above 1.11.”

“The EUR-positive argument is a qualitative one: the fact that the ECB ends its ultra-expansionary monetary policy at all.”

“If the ECB ends the period of permanently negative interest rates in the next few months, then at least there is a chance that it will pursue a monetary policy that supports the euro.”