Published on 10.08.2022 16:17

Ever since it hit parity with the US dollar just a little less than a month ago, the Euro has been grinding steadily higher and in today’s trading session, the currency has so far reached a high of 1.0253. This might be as high as it will go according to some analysts who believe another round of selling is just around the corner which will more than likely once again push the Euro below parity.

Analysts from Dutch firm Rabobank expect the Euro back below the parity level level over coming weeks driven by a number of factors such as the growing odds of recession in the Eurozone, the ever increasing price of energy supplies which come winter time many may not be able to afford.

“Rising electricity prices in Europe are making new record highs this week, and while it is odd that this alone has not pushed EUR/USD lower, it is just a matter of time, in our view. Next week, droughts in Germany may lead to the water levels on the river Rhine falling below 40cm at Kaub (the shallowest part of the river’s mid-section), making the river virtually impassable for cargo,” says Jordan Rochester, a strategist at Nomura.

Another thing that will continue to weigh on the Euro is the current rate hiking cycle from the US Federal Reserve which has been one of the most ferocious in several decades as they try to haul in inflation figures which are hovering around a 40 year high.

Whether the rate hikes are working of not may be known today with the release of the critical US consumer inflation figures for July, scheduled later during the early North American session.

The headline CPI is anticipated to rise by 0.2 percent during the reported month, down sharply from the 1.3 percent in June. The yearly rate is also expected to decelerate to 8.7 percent in July from the 9.1 percent previous. Meanwhile, core inflation, which excludes food and energy prices, is projected to rise by 0.5 percent in July and jump to 6.1 percent on yearly basis from 5.9 percent in May.


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