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Jan 13 - 10:55 AM

Credit Agricole: EUR/USD Outlook: Parallels to the Energy-Driven Lows of 2022 are Unwarranted

By eFXdata  —  Jan 13 - 10:15 AM

Synopsis:

Despite EUR/USD starting 2025 under pressure due to economic and policy divergence, Credit Agricole argues that parallels to the energy-driven lows of 2022 are unwarranted.

Key Points:

  1. Economic and Policy Divergence:

    • European economic concerns, coupled with potential US trade tariffs, have underscored cyclical and policy divergence.
    • A dovish ECB contrasts with a more neutral Fed, weighing on EUR/USD.
  2. Energy Concerns vs. 2022:

    • Rising European gas prices, driven by reduced Russian supplies and falling storage levels, mirror past fears but lack the same disruptive potential.
    • Sovereign credit risks tied to energy markets are less likely to resurface compared to three years ago.
  3. Relative Valuation Support:

    • EUR/USD appears undervalued based on relative commodity terms of trade between the Eurozone and the US, providing a buffer against further downside.

Conclusion:

Credit Agricole believes comparisons to 2022’s EUR/USD lows are overblown, citing diminished systemic energy risks and improved relative valuation metrics as stabilizing factors.

Source:
Crédit Agricole Research/Market Commentary

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