The firm notes that while natural gas pries have corrected lower in the past few weeks, they still represent a source of downside risk for EUR/USD especially. They argue that the euro area growth outlook is continuing to deteriorate and that inflation shows no signs of easing just yet. Adding that:
"The ECB is expected to make additional outsized moves in upcoming meetings (67/58/48 bps priced in for the Sept/Oct/Dec meetings) but hiking into a recession and further widening of BTP-Bund spreads is likely to mitigate any positive impact of higher rates on FX."
They maintain a bearish bias on EUR/USD and eye further downside in EUR/JPY as well as EUR/CHF. Some snapshots from the report:
