- EUR/USD is under pressure on a combination of weighty fundamentals
- Bears move in for the kill, forcing the euro to below 1.09 the figure.
EUR/USD has been under pressure in Asia as markets are trading risk-off and the dollar continues higher on the bud, extending the overnight gains. The euro has dropped to a low of 1.0890 from the 1.0908 highs of the session.
The prospect of the Federal Reserve quickly reducing its debt holdings was whipped up in the early stages of the Us session on Tuesday at the same time that fresh sanctions are being imposed on Russia. The combination of that coupled with terrible Chinese Services data has knocked the wind out of markets in Asia.
Fed's Brainard stated on Tuesday that containing inflation is "critical," adding that the central bank may begin rapidly reducing its balance sheet as soon as May. Investors are concerned that a more restrictive US central bank will ultimately cause a recession.
Meanwhile, activity in China's services sector imploded at the sharpest pace in two years in March. The Covid infections have ultimately restricted mobility and weighed the demand for services. China's Caixin services PMI for March came in at 42.0 vs. 53.0 expected and 50.2 last, showing that the country’s services activity contracted on coronavirus outbreak-induced lockdown measures.
On Tuesday, Chinese authorities extended a COVID-19 lockdown in Shanghai to cover all of the financial centre's 26 million people, despite growing anger over quarantine rules in the city.
As a consequence of this toxic mix of fundamentals, an Asia-Pacific stock index fell about 1.5%, led by Japan and Hong Kong, which reopened after a holiday. Futures in the US and Europe also fell as a result of a drop in Wall Street stocks.
Meanwhile, the release of minutes from the Fed's last policy meeting is out later in the US session on Wednesday. These are expected to scrutinise for clues on the prospect of a 50 basis point hike in May. '' 'The FOMC pull no hawkish punches in its policy guidance, with Chair Powell also hinting further information about QT plans will be provided in the minutes (possibly including caps details). We continue to expect an official QT announcement at the May FOMC meeting,'' analysts at TD Securities said.
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.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.