August 16, 2022 12:29 AM ET
EUR/USD is licking its wounds around 1.0160 after a brief corrective pullback as data fears are joined by fears of an economic slowdown. This also justifies the major currency's bearish technical formation early Tuesday morning in Europe.
Europe is working on a nuclear deal with Iran to address the energy crisis at home. However, Tehran's reaction seems to be less enthusiastic, as Tehran's "additional views and considerations" on the EU text would be communicated at a later date, according to Reuters. It is worth noting that German Economy Minister Robert Habeck said on Monday, as reported by Reuters, "Germany's energy model dependent on Russia has failed and is not coming back."
On the other hand, weaker data from the U.S. and China and declining Treasury yields reflect economic fears, not to mention U.S.-China disputes. On Monday, the NY Empire State manufacturing index fell to 31.3 in August from 11.1 in July and 8.5 in market forecasts. In addition, the NAHB U.S. builder confidence index fell to 49 in August from 55, the lowest level since the first months of 2020. On the other hand, China released negative retail sales and industrial production data for July while announcing an interest rate cut by the People's Bank of China (PBOC).
Nonetheless, market chatter that China's efforts are not enough to restore market sentiment seems to be putting additional downward pressure on EUR/USD rates.
In addition, concerns about the conflict between the U.S. and China have increased, weighing on EUR/USD rates as Xinhua reported that China has imposed sanctions on a number of Taiwan separatists. Earlier, the visit of several U.S. lawmakers to Taiwan irritated Beijing, which in turn led to fierce military exercises near the border with Taiwan and an escalation of geopolitical risks.