- The euro is set to drop further against the dollar, investment strategist AJ Oden told Insider.
- High inflation, Russia's war on Ukraine, and a worsening energy crisis mean will continue to pressure the euro.
- Meanwhile, the dollar has shown strength in part because the Fed is further along in monetary tightening than the ECB is, he said.
The euro is set for further declines as a slate of headwinds, including an energy crisis and war, add pressure to the currency, according to an investment strategist.
At the same time, the US dollar will continue to climb because the Federal Reserve is further along than the European Central Bank is in tightening monetary policy. This week, the euro dipped below parity with the dollar.
"The ECB has done some tightening but they are still doing bond purchase program," AJ Oden, senior investment strategist at BNY Mellon, told Insider. "The Fed is doing the opposite, we're pulling money out of the system. The probability of recession is just much higher in Europe."
Europe's worsening energy crisis and ongoing repercussions of Russia's war on Ukraine have led to investors shedding euros and flocking to the dollar, he explained. And with the dual threat of fresh European sanctions on Russian oil and the chance that Russia halts flows on its own, risks continue to mount.
"Inflation's already at double digits in Europe, and as we move into the winter there's concern Russia could tighten more in natural gas, and energy prices could pop up again," he said.
Given its status as the global reserve currency, the greenback will maintain course and stay near 20-year highs, Oden noted, and with the Fed signaling further rate hikes, that strength against the euro will continue.
Meanwhile, Societe Generale echoed a similar sentiment this week, predicting that Europe's energy crisis will prevent the euro from rebounding this year.