The Euro was struggling just below parity with the US Dollar for a sixth consecutive trading day on Monday, as Europe’s energy woes weighed on sentiment, while the greenback advanced to a fresh two-decade peak against major peers after Fed Chair Jerome Powell indicated interest rates would be maintained at higher levels for longer to curb surging inflation.
Fed’s Powell on Friday warned that there would be “some pain” for consumers and businesses, as it will take time for the central bank to bring inflation back under control.
“Powell made it clear that there is no dovish pivot as some market participants had expected,” Carol Kong, senior associate for currency strategy and international economics at Commonwealth Bank of Australia, was quoted as saying by Reuters.
Markets are now pricing a 76.5% chance of another super-sized 75 basis point rate hike from the Fed in September.
“While the discussion on the magnitude of rate hikes may start to take a backseat from here, focus will shift to peak rates and how long those will be held,” Charu Chanana, market strategist at Saxo Capital Markets, said.
2-year US Treasury yields rose to highs unseen since late 2007, to 3.4890% on Monday, while 10-year Treasury yields were at 3.1227%.
Market players will be also focusing on news regarding the Nord Stream pipeline maintenance and how quickly it will return to operation, as Russia’s Gazprom said it would stop Europe’s natural gas supply from August 31st to September 2nd.
As of 8:43 GMT on Monday EUR/USD was edging down 0.33% to trade at 0.9931. During late Asian trading session, the major Forex pair slipped as low as 0.9914, which has been its weakest level since August 24th (0.9910).
EUR/USD has retreated 2.93% so far in August, following another 2.46% loss in July.
Daily Pivot Levels (traditional method of calculation)
Central Pivot – 1.0000
R1 – 1.0054
R2 – 1.0144
R3 – 1.0197
R4 – 1.0251
S1 – 0.9910
S2 – 0.9857
S3 – 0.9767
S4 – 0.9677