EUR/USD: Energy shock keeps pair under pressure – MUFG
MUFG analysts maintain a short EUR/USD stance, arguing that the Euro faces a larger negative terms-of-trade shock from higher Oil and natural gas prices. Their scenario analysis links a 60% crude rise to EUR/USD around 1.1300, with ranges of 1.16–1.18 in a benign outcome and 1.0700–1.1300 under a more severe escalation.
Euro vulnerable to higher energy costs
"Based on our regression analysis based on how the dollar responds to a 10% jump in crude oil prices, the EUR/USD drop of 3.0%-3.5% since the crisis began in consistent with the 50% advance from crude oil prices (our analysis shows for every 10% gain, EUR/USD drops 0.7%)."
"We continue to run a short EUR/USD trade view based on the risk skew of further US dollar gains over the coming weeks."
"In Scenario 1 we would see Brent crude oil in a range of USD 75-85 p/bl, which assume a risk premium of USD 10 p/bl is in the price for some time. The US dollar could weaken back modestly with EUR/USD in a 1.16-1.18 range."
"A crude oil price of USD 110 p/bl would be a near 60% increase from the pre-conflict level which based on our regression analysis would imply EUR/USD falling to 1.1300 – so we assume a Scenario 2 range of 1.1200-1.1600. De-escalation ultimately takes place it just takes longer to achieve than in Scenario 1."
"A 100% increase in crude oil prices and more in natural gas prices in Europe, the dollar gains further with scope for EUR/USD to drop as low as 1.0700. The EUR/USD range is 1.0700-1.1300."
"However, the increasingly hawkish repricing of ECB policy expectations is unlikely to prevent further EUR weakness, given the bigger negative terms of trade shock facing European economies from more expensive energy imports. EUR/USD has now broken below support at 1.1500, reinforcing our short EUR/USD trade idea."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
NASDAQ TRADE HALT <RIBBU.O> VOLATILITY TRADING PAUSE AT 12:14 PM
NASDAQ TRADE HALT VOLATILITY TRADING PAUSE AT 12:14 PM
Siebert CIO Says Micron Stock Is a Buy, Just Not Forever
Magna International Inc. Price Target Cut to $77.00/Share From $80.00 by TD
Ratings actions from Baystreet: http://www.baystreet.ca (END) Dow Jones Newswires October 08, 2026 11:09 ET (15:09 GMT)
Dow Jones Top Financial Services Headlines at 11 AM ET: Q&A: Bitcoin Funds Are Expanding. HANetf's Co-CEO Explains Why | Global ...
Q&A: Bitcoin Funds Are Expanding. HANetf's Co-CEO Explains Why Last week, London-based HANetf, an exchange-traded fund provider, launched the world's first euro-hedged bitcoin ETC-noting a shift in demand among its European client base. ---- Global Bond Turmoil Reveals the Surprising Resilience of Emerging Markets "It's very clear that EM is behaving differently than in the past, and EM is holding up better than expected." ---- U.K. Regulators Ready Green Light for $4 Billion ATM Tie-Up Between Brink's, NCR Atleos Authorities said the offer to sell off some parts of Brink's business should address concerns over the ATM operator's planned acquisition of its rival. ---- Choosing the Right Bond Strategy for Today's High-Yield World Before chasing higher rates, bond buyers have to figure out what type of investor they actually are. ---- Fed's Waller Sees Multiple Rate Increases Ahead to Cool Inflation In prepared remarks at the Istanbul Economic Forum, Christopher Waller said the economic data underscoring the need for interest-rate increases hasn't shifted much. ---- Financial Services Roundup: Market Talk Find insight on ABN Amro Bank, Standard Life and more in the latest Market Talks covering financial services. ---- Wells Fargo Faces Regulator Probe Over Efforts to Boost Black Homeownership Trump's Housing and Urban Development is seeking to crack down on race-based lending, calling it a potential violation of the Fair Housing Act. ---- Ripple, Crypto's Payments Giant, Breaks Into Wall Street The crypto firm is emerging as a serious player in financing leveraged ETFs, a lucrative business long dominated by big banks. ---- Venture Firm Behind Chip Startup Groq Targets $10 Billion Megafund Winning bets on hot AI startups are vaulting a little-known Dallas firm into a small group of firms raising gigantic funds. ---- How one trend-following fund outperformed rivals by bringing humans back into the decision-making process One trend-following fund has outperformed rivals this year by deciding to take profits. ---- Wal
Crypto prices
More
