EUR/USD juggles above 0.9900, downside looks likely on German energy crisis
- EUR/USD is oscillating in a narrow range of 0.9906-0.9935 after a gap down open ahead of ECB policy.
- Gazprom's promise of energy supply is insufficient to offset energy supply cut from Nord Stream 1 pipeline.
- The DXY has refreshed its two-decade high at 110.09 on upbeats US NFP data.
The asset is witnessed a steep fall continuously after the release of the eurozone Harmonized Index of Consumer Prices (HICP). The preferred inflation indicator by the European Central Bank (ECB) landed at 9.1% led by the soaring energy crisis in the eurozone. The escalation of unscheduled maintenance of the Nord Stream 1 pipeline under the Baltic Sea due to leakage issues triggered an energy crisis. To offset the same, Russian energy giant, Gazprom said it will increase its shipments of gas to Europe via Ukraine, according to Politico.
Well, this doesn’t seem to be a permanent solution for energy supplies. Adding to that, the gas supplies en-routing through Ukraine could be troublesome as things are still complicated between Moscow and Kyiv.
Apart from that, the event of an interest rate decision by the ECB scheduled on Thursday has kept the investors on the tenterhooks. The ECB has remained laggard in hiking interest rates and is now forced to sound extremely hawkish to cool down the heated inflation. ECB President Christine Lagarde is expected to announce an interest rate hike by 50 basis points (bps) escalating the critical rates to 1%.
As US markets will remain closed on account of Labor Day, risk sentiment is going to drive the FX domain. Investors should be noted that the US dollar index (DXY) has refreshed its two-decade high at 110.09. The release of the upbeat US Nonfarm Payrolls (NFP) data strengthened the DXY. This will support the Federal Reserve (Fed) while handling the tedious job of slowing down inflationary pressures.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
