European TTF Gas Rises as Storage Withdrawals Accelerate
European natural gas prices have surged above €85 per megawatt-hour amid rising concerns about the accelerated withdrawals from storage facilities. This uptick highlights a critical juncture for European economies, as escalating energy costs could amplify stagflationary pressures. As the ECB faces the dual challenge of navigating inflation and stagnant growth, these energy market dynamics are likely to weigh heavily on policy considerations, potentially disadvantaging the euro against the dollar in the near term.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). This positioning reflects concerns over the eurozone's economic vulnerability amid rising energy costs.
How firms align
JPMorgan appears aligned with the current sentiment, forecasting a target of 1.10 for EUR/USD, supporting the view that rising energy prices could exacerbate economic challenges in the region. BofA, conversely, holds a more bearish outlook with a target of 1.04, in line with a firmer USD stance and concerns regarding eurozone resilience.
What the data shows
Forecast revisions indicate a deeper focus on energy price dynamics in shaping inflation expectations, which may prompt further policy tightening if the situation deteriorates. Additionally, our recent research highlights the volatility in energy prices from /research/energy-costs-impact.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Natural gas prices in Europe rising above €85 could hinder ECB's policy stance.
- 02Watch EUR/USD shorts as rising costs intensify stagflation fears.
- 03Key risk level to monitor: sustained gas prices above €85 impacting euro rates.
Market implications
Next, traders should monitor EUR/USD as it approaches pivotal support levels around 1.07. The upcoming ECB meeting may provide further guidance on how energy costs will influence policy. Our consensus target of 1.075 remains central to positioning strategies.
Risks to this view
A significant drop in energy prices or an unexpected resolution to supply constraints could reverse the bearish outlook for EUR/USD. Additionally, if the ECB signals more aggressive monetary policy in response to inflation, it may alleviate euro pressure.
Sentiment by currency
USD+EUR JPY~GBP~Composite USD score: +0.35
Sources & References
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