- EUR/USD plunges to an eight-month low at 1.1090 as fears of a recession in Europe intensified.
- The broad-based risk-off impulse has underpinned the euro against the greenback.
- Fed chair Jerome Powell’s testimony will be a major event to keep under the radar.
The EUR/USD pair has been the most vulnerable in the wake of the Russia-Ukraine war as the former has been hammered the most in the carnage of risk-sensitive currencies. The major has hit a fresh eight-month low at 1.1090 as the geopolitical tensions between Russia and Ukraine escalate.
The exchange of military strikes between the Kremlin and Kyiv has impacted the macros of Europe. The economy of Europe which banks on the oil and energy exports from Moscow have taken a bullet after the sanctions on Russia. The Kremlin is unable to export oil and energy after the collapse of its SWIFT international banking system.
It is worth noting that Europe’s 40% natural gas consumption and more than a quarter of the oil demand derive from Russia. Post the restrictions on Moscow, Europe would need to resort to its production or avail the same from other nations to augment their requirements. This may pressurize the prices of oil and energy and eventually on the final goods. It is more likely that the European economy will observe overstepping of its January 2022 print of inflation, which was at 5.1%.
Meanwhile, the US dollar index (DXY) has climbed above 97.00 after the US Manufacturing PMI rose to 58.6, higher than the market consensus of 58 and the previous print of 57.6.
The Euro Markit Manufacturing PMI slips to 58.2 lower than the estimates and previous figure of 58.4, which has also underpinned the greenback against the euro.
Now, investors will focus on Wednesday’s testimony from the Federal Reserve (Fed) Chair Jerome Powell. However, the headlines from the Russia-Ukraine war will remain the major driver.