- EUR/USD is marching towards 1.0000 parity on soaring ECB hawkish bets.
- Russia has cut off the energy supply to Eurozone citing western sanctions.
- The DXY has turned volatile amid weaker US ISM Services PMI estimates.
The EUR/USD pair displays a minor correction after printing an intraday high of 0.9970 in the Asian session. The corrective move does not resemble signs of bearish reversal but a healthy decline, which the market participants for adding longs will capitalize on. On Monday, the asset displayed a firmer rebound after halting the crucial support of 0.9900. As investors considered the pair a value bet, the shared currency bulls strengthened and recovered sharply.
The eurozone bulls are picking bids as odds are advancing for a hawkish stance by the European Central Bank (ECB) on interest rates. As price pressures are soaring in the trading bloc, ECB President Christine Lagarde may announce a rate hike by 50 basis points (bps). Eurozone Harmonized Index of Consumer Prices (HICP), ECB’s most preferred inflation indicator landed at 9.1%, which is highly needed to contain sooner.
Meanwhile, the energy crisis deepens in the eurozone as Russia has halted energy supplies through Nord Stream 1 pipeline due to western sanctions. Western leaders levied a price cap on Russian oil and in response, Kremlin has cut off gas supply ahead of the winter season, known for higher energy demand.
On the dollar front, the US dollar index (DXY) has attempted a recovery after remaining volatile in the opening session. The DXY has picked bids around 109.40, however, the downside remains favored amid weaker estimates for The US ISM Services PMI data. The economic data is seen at 55.5, lower than the prior release of 56.7.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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