The EUR/USD pair has received offers to renew its intraday losses in the vicinity of 0.9925 as the markets open in Europe on Monday. By doing so, the top currency pair acknowledges the generally strong US Dollar index in the midst of hawkish expectations of the US Federal Reserve in a session.
Still Hawkish from the Fed’s End
The US Dollar index rose to a new high since 2002. It went up by 0.50% close to 109.35 and the Treasury yield rallied after the Chairman of the Federal Reserve, Jerome Powell, dampened the market’s expectations. He did not come out with a cautious tone as expected.
EUR/USD price chart. Source TradingView
A number of other factors encouraged the US Dollar’s safe-haven status aside from Powell’s firm defense of the Reserve’s hawkish policy. They include the widespread recession concern and the tussle between China and the United States. Washington and Beijing recently had a spat over the presence of American ships in the Taiwanese Strait.
The escalated energy crisis in Europe and doubts that central banks around the world might not be able to address the problems of recession, give strength to the risk-off atmosphere. The Jackson Hole presented a strong case for why central banks might not meet expectations.
The US ten-year Treasury yield also expressed the market’s mood as it rose by 9 basis points and reached 3.123%. Futures such as the S&P 500 fell by 0.80% on intraday as it traced the downbeat figures from Friday’s performance on Wall Street.
The Energy Crisis Persists
There is news that the German ruling party, SPD, wants to make a proposal on measures that will reduce the effect of increasing energy costs in the country. The announcement has posed a challenge to bears of the EUR/USD pair.
Hawkish statements from the ECB’s policy makers at Jackson Hole have the same effect. Part of those who made hawkish statements were the Governors of the French and Latvian Central bank, Francois Villeroy de Galhau and Martins Kazaks, as well as Isabel Schnabel, a board member of the ECB. They all called for a strong policy move.
For the days ahead, traders should have their attention fixed on moves around the US Treasury yields and the Dollar index. The duo might give new momentum while there is a light schedule of activities and the UK holiday. But statements from the Federal Reserve and talks about recession, including the energy crisis, might have bears hopeful about the EUR/USD pair as the jobs report comes on Friday.