The euro has enjoyed some much needed respite since mid-May after extended long positioning on the U.S. dollar faded. Yesterday’s oil embargo on Russia has now heightened fears of further downward growth revision within the euro zone despite inflation data showing no signs of relief. This has prompted money markets to price in further rate hikes (see table below) all the way through to 2023 which may be unlikely as the economic outlook for the region remains skewed to the downside.
