Wall Street’s biggest banks are expecting the euro to fall to parity with the US dollar, as the war in the Middle East threatens to push up the price of Europe’s imported energy and higher borrowing costs weigh down on eurozone growth. JPMorgan has downgraded its forecast for the euro to $1 by the end of the year. Citibank said it is targeting a move to parity “within six months” given its “ongoing view of European recession well ahead of the US”.
Prices were trading at about €50 per megawatt hour on Monday, still far below a peak of more than €300/MWh hit in August 2022. Europe has largely filled its gas stocks in preparation for winter, cushioning it from further disruption. In a research note on Friday, analysts at Goldman Sachs said the bearish case for the euro has been growing, exacerbated by bond investors’ concerns over Italy’s bigger than expected budget deficit. “First, activity data disappointed expectations over the summer.