Citigroup strategists lowered the EUR/USD forecast for the next three months from 1.135 to 1.105 due to concerns about tail risks in the European market, the possibility that interest spreads will widen further and be beneficial to the US, and continued geopolitical concerns that energy prices may remain high. “Although the market now seems to have more fully reflected “Europe's tail risk,” we believe the asymmetry will still favor the dollar over the euro throughout November,” strategists such as Daniel Tobon, Osamu Takashima, and Brian Levine wrote in the report on Thursday. The strategist pointed out that the significant widening of interest spreads between 10-year French treasury bonds and a “sharp correction” in European bank stocks are evidence of this kind of repricing. At the same time, strategists believe that the Middle East conflict has led to high energy prices, leaving the ECB in a situation where there are “no good options.” They said that taking a hawkish stance may put pressure on European government bonds, while adopting a dovish stance may cause interest spreads to become more unfavorable.

Citigroup strategists lowered the EUR/USD forecast for the next three months from 1.135 to 1.105 due to concerns about tail risks in the European market, the possibility that interest spreads will widen further and be beneficial to the US, and continued geopolitical concerns that energy prices may remain high. “Although the market now seems to have more fully reflected “Europe's tail risk,” we believe the asymmetry will still favor the dollar over the euro throughout November,” strategists such as Daniel Tobon, Osamu Takashima, and Brian Levine wrote in the report on Thursday. The strategist pointed out that the significant widening of interest spreads between 10-year French treasury bonds and a “sharp correction” in European bank stocks are evidence of this kind of repricing. At the same time, strategists believe that the Middle East conflict has led to high energy prices, leaving the ECB in a situation where there are “no good options.” They said that taking a hawkish stance may put pressure on European government bonds, while adopting a dovish stance may cause interest spreads to become more unfavorable.