The US dollar reached a 20-year high, around 107.264, weighing on the EUR/USD.Europe’s energy crisis takes center stage as prices soar, as countries like Germany and France scramble to ease the burden.
The German Economy Minister Rober Harbeck said that current conditions could result in a recession.
The shared currency continued its collapse against the greenback, courtesy of recession fears in the Euro area, amidst an energy crisis that, if it aggravates, might cause a long-lasting economic contraction, as Russia threatens to halt natural gas flows to the bloc. At the time of writing, the EUR/USD s trading at fresh 20-year lows at 1.0175.
Negative mood and a strong US dollar, a headwind for the EUR/USD
A risk-off impulse favors safe-haven flows, meaning global equities are down and a stronger greenback. Recession fears appear to dissipate as traders brace for the release of the FOMC minutes. Softer US data revealed earlier showed that the US economy is slowing down, as illustrated by S&P Global and ISM Non-Manufacturing PMIs.
Alongside the previously mentioned factors weighing on the EUR/USD, China’s authorities reported that Shanghai recorded more than 100 positive cases, re-igniting fears of additional lockdowns. In the meantime, the European energy crisis aggravates as power prices skyrocket, courtesy of Russia’s tightening squeeze on energy supplies.
Germany Economy Minister Robert Habeck said that the current situation in Germany could result in a recession, according to Reuters. Meanwhile, the German government proposed an emergency law allowing the government to acquire shares of energy firms if they needed to be bailed out.
All the above-mentioned took their toll on the euro. EUR/USD Wednesday’s price action shows the major opening near the daily highs around 1.0264 and seesawed throughout the Asian session. When European traders arrived at their desks, the pair began nosediving and reached a fresh 20-year low at 1.0161.
In the week ahead, the EU economic docket will feature the German Industrial Production and ECB speaking led by ECB’s Philip Lane and Enria. Across the pond, the US calendar will unveil Initial Jobless Claims, ADP Employment Change, and Fed speakers, with Christopher Waller and St. Louis Fed President James Bullard crossing newswires.
EUR/USD bottomed at a fresh two-decade low of 1.0160 on Tuesday, bouncing afterwards but holding below 1.0200. FOMC Meeting Minutes showed US policymakers are willing to become more restrictive if inflation persists. Growth forecast downwardly revised for this year and the next.
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