According to a Citigroup strategist, the euro is likely to fall further against the US dollar even after it lost parity and hit 20-year lows.
Luis Costa said surging prices for natural gas and other commodities are having an outsized impact on European economies.
The head of strategy for central and eastern Europe, the Middle East and Africa told CNBC's "Squawk Box Europe" that the shared currency is likely to weaken against the US dollar.
He said that household economies in Europe are going through a more violent shock than in the US. The story brought us below parity.
He said that the outlook, trades and positioning were biased towards further euro depreciation.
On Monday, the euro fell below $1 for the second time this year, as fears of a European gas shortage intensified and spurred worries about a recession. It was near 20-year lows early Tuesday, but had risen to above parity by the time it was over.
Europe is facing an economic battle due to a strong dollar and an energy crisis that has seen natural gas prices soar.
The currency dropped this week after Russia's state-run energy company said it will close a natural gas line for three days. The squeeze on energy supply to households and industries is made worse by that.
Costa said that the euro's weakness was due to the energy crisis.
He said that the manufacturing cycle in Europe has a fierce downside bias.
The European Central Bank has been forced to raise interest rates because of fears that the energy crisis will cause a recession. Higher yields attract foreign investors who seek returns and in turn boost demand for the currency.
Costa said that the room to lift rates would be minimal.
The euro is falling against the dollar as recession fears are raised.
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