- EUR/USD breaches below 1.0100 and clinches new lows.
- ECB Visco advocated for a 50 bps (?) rate hike in September.
- It is Payrolls’ day across the Atlantic, yay!
EUR/USD accelerates losses and breaks below the 1.0100 level for the first time since December 2002.
EUR/USD weaker on USD-strength, looks to data
EUR/USD extends the decline for the sixth consecutive session so far on Friday amidst deteriorating conditions in the risk-associated universe, rising speculation of a recession in the euro bloc and intense dollar gains.
No effects on the single currency from hawkish comments by ECB’s Visco, who suggested a larger than 25 bps rate hike at the September event in case inflation conditions do not improve (which looks like the most probable scenario). He also expects (wishes) that inflation could return to the bank’s 2% target in 2024.
In the German money market, the 10y Bund yields appear slightly on the defensive above 1.25% following Thursday’s decent uptick.
In the docket, Italian Industrial Production contracted 1.1% MoM in May and expanded 3.4% vs. May 2021. Later in the session, Chair Lagarde will participate in an event in France.
In the NA session, June’s Nonfarm Payrolls will steal the show seconded by Wholesale Inventories and Consumer Credit Change as well as the speech by NY Fed J.Williams.
What to look for around EUR
Bears maintain the EUR/USD under heavy pressure and the acceleration of the downside opens the door to a probable visit to the parity level sooner rather than later.
Indeed, the pair’s price action remains depressed and keeps closely following rising speculation around a probable recession in the region, dollar dynamics, geopolitical concerns, fragmentation worries and the Fed-ECB divergence.
Key events in the euro area this week: ECB Lagarde (Friday).
Eminent issues on the back boiler: Fragmentation risks. Kickstart of the ECB hiking cycle in July? Asymmetric economic recovery post-pandemic in the euro bloc. Impact of the war in Ukraine on the region’s growth prospects and inflation.
EUR/USD levels to watch
So far, spot is down 0.37% at 1.0118 and faces the next contention at 1.0071 (2022 low July 8) seconded by 1.0060 (low December 11 2002) and finally 1.0000 (psychological level). On the upside, a breakout of 1.0538 (55-day SMA) would target 1.0615 (weekly high June 27) en route to 1.0773 (monthly high June 9).
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