Published on 11.07.2022 14:54

The Euro has given up its gains from Friday, down by more than 100 points against the greenback, and is once again heading towards the parity level against the US dollar due to a number of different factors continuing to dog financial markets

Renewed concerns over China reinstating coronavirus-related lockdowns are weighing on market mood at the beginning of the week. Additionally, Nord Stream 1 gas pipeline shut down for a scheduled 10-day maintenance. Although this is an annual occurrence, investors are worried that Russia could see this as an opportunity to further trim its energy exports to Europe by delaying the reopening or even shutting off the pipeline for good.

 The ECB is set to deliver a 25-basis point hike later this month following in the footsteps of other central banks such as the US Federal Reserve which has already hiked by 150 basis points, the BoE by 115 basis points and the Bank of Canada by 125 basis points.

The rate hike is unlikely to help the European currency because for one, the Eurozone is already far behind on rate hikes compared to other economies and two, many analysts are predicting a recession across Europe which means it is hardly the perfect time to be raising interest rates

The news to keep an eye on this week which will decide if the Euro hits parity against the greenback is the ZEW economic sentiment index from Germany as well as the all-important US CPI inflation data for June to gauge whether recent aggressive rate hikes are having any material effect in slowing inflation.

Friday rounds out the week with US retail sales data for June which appears to be positive from early estimates, in contrast from last month’s figure of -0.2%. Lastly, the University of Michigan’s consumer sentiment index rounds off the trading week and a strong number may be the final catalyst for parity.


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