Analysis-Euro parity is back on the dial for FX markets
© Reuters. FILE PHOTO: Euro and U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
Yet increasingly, euro area specific factors, particularly exposure to higher oil prices, risk further weakness in an already stagnating economy, and the single currency. Morgan Stanley chief Europe economist Jens Eisenschmidt said besides being more exposed to energy shocks, the euro area is also more exposed to geopolitical risk than the United States.
"Should we see a material deterioration in the Italian bond market, and barring a swift reaction by the ECB to calm investors, euro/dollar downside risks would extend to the $1.00/$1.02 area," said Pesole. He added that a backdrop of solid U.S. data and a hawkish Federal Reserve was also important.
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