- EUR/USD holds lower ground after refreshing monthly bottom the previous day.
- ECB policymakers, German Finance Ministry’s report contribute to the economic slowdown fears.
- Fed policymakers, firmer US data adds strength to the US dollar.
- German PPI, risk catalysts to help determine short-term directions.
EUR/USD dribbles around 1.0090 during the sluggish Asian session on Friday, after crashing to refresh monthly low the previous day. The major currency pair recently bear the burden of a firmer US dollar, as well as grim economic concerns at home.
The US dollar jumped to the highest levels in one month late Thursday as price-positive numbers from Philadelphia Fed Manufacturing Survey and the weekly Initial Jobless Claims rejected the US recession fears. The activity gauge rallied to 6.2 for August versus -5 expected and -12.3 prior while the weekly jobless claims dropped to 250K, below 265K market consensus and 252K revised prior. With this, the US Dollar Index (DXY) refreshed its monthly high to 107.56, at 107.51 by the press time.
Hawkish Fedspeak and economic concerns surrounding China, as well as Europe, also contributed to the DXY strength, mainly due to the greenback’s safe-haven demand. San Francisco Fed President Mary Daly mentioned that they (Fed) will continue to raise the rates to “right-size it.” The policymaker added that either 50 basis points or a 75 basis points hike would be appropriate while signaling the move for the September rate decision. However, Minneapolis Federal Reserve Neel Kashkari mentioned that, per Reuters, he does not believe the county is currently in a recession. Further, the all-time hawk St. Louis Fed President James Bullard said he is leaning towards another 75 bps rate hike in September.
Goldman Sachs and Nomura both cut the dragon nation’s growth forecasts after witnessing the latest jump in the covid numbers. Also negatively impacting the Chinese economy are the doubts over the People’s Bank of China’s (PBOC) capacity to tame recession woes. Additionally, comments from the US Trade Representative’s office stating, “Early this autumn, the US and Taiwan will begin formal negotiations on a trade initiative,” seem to renew the fears of the US-China tussle and also roil the mood.
“The economic outlook for Germany, Europe’s largest economy, is gloomy due to energy price rises and supply chain disruptions,” the German Finance Ministry said in its August monthly report, per Reuters.
Elsewhere, ECB executive board member Isabel Schnabel said on Thursday, “Recession on its own would not be enough to control inflation.” The policymaker also backed the regional central bank’s current policies. Following that, ECB Governing Council member Martins Kazaks said in an interview with Latvia’s TV3 on Thursday, “the ECB will continue to hike interest rates to tame inflation,” per Bloomberg.
Against this backdrop, Wall Street closed mixed and restrict the S&P 500 Futures while the US 10-year Treasury yields retreated from their monthly high to 2.875% by the press time.
Looking forward, Germany’s Producer Price Index (PPI) for July, expected 32% YoY versus 32.7% prior, will decorate the calendar. However, major attention will be given to qualitative catalysts for better trade-related decision-making.
A clear downside break of a three-week-old ascending trend line, around 1.0180 by the press time, keeps EUR/USD bears hopeful of revisiting the yearly low of 0.9952.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.