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Title: EUR/USD slides towards parity amid German recession woes, hawkish Fed bets

August 19, 2022 01:35 AM ET

By: AnalysisWatch

The EUR/USD is trading near the monthly low of 1.0070, with the strength of the U.S. dollar keeping the pair's bears happy amid a gloomy European morning on Friday. However, fears of a recession in Germany and geopolitical concerns, as well as hawkish Fed talk, are weighing on the major currency pair.

Nonetheless, the US Dollar Index (DXY) hit a four-week high of 107.72, up for the third day in a row, and was trading around 107.68 at press time, thanks to a variety of catalysts ranging from hawkish comments from Fed policymakers to upbeat domestic data, as well as geopolitical concerns about China and Europe.

In recent news, Bloomberg reported that Chinese President Xi Jinping and Russian President Vladimir Putin plan to attend a Group of 20 summit in Bali later this year, Indonesian President Joko Widodo said in an interview. The news also mentions that this is the first time the leader of the world's fourth most populous nation has confirmed that the two men plan to attend the November summit. The news reinforces market anxiety and fear of further drama, which contributed to the flight to safety and allowed the DXY to regain its monthly high after the release.

Elsewhere, hopes that the Iran nuclear deal will deliver the desired results are trying to keep EUR/USD stable. According to Reuters, inflation in the eurozone hit a new record high of 8.9% year-on-year in July, and a nasty feedback loop is opening up as the current account deficit weighs on the euro and import bills for commodities ranging from gas to metals rise.

Germany's Producer Price Index (PPI) for July, expected at 32% y/y from 32.7% previously, will provide immediate guidance to EUR/USD. However, Fed Chairman Jerome Powell's speech next week at the Jackson Hole Symposium will be a crucial catalyst for clear guidance.

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