Citi lowers euro-to-dollar forecast due to European risks and high oil prices.

Citi strategists cut their three-month EUR/USD forecast from 1.135 to 1.105, citing concerns over tail risks in European markets, the likelihood of further spread widening that favors the US, and persistent geopolitical worries that could keep energy prices elevated. "While the market appears to have priced in European tail risks more fully now, we believe the asymmetry will remain skewed toward the dollar rather than the euro throughout November," strategists including Daniel Tobon, Osamu Takashima and Brian Levine wrote in a report on Thursday. The strategists noted the significant widening of the spread between 10-year French and German government bonds, as well as a "sharp pullback" in European bank stocks, as evidence of this repricing. Meanwhile, the strategists believe that elevated energy prices caused by the Middle East conflict have put the European Central Bank in a position of "no good options." They said a hawkish stance could weigh on European government bonds, while a dovish stance could lead to increasingly unfavorable spreads.