EUR/USD approaches 1.0500 as anxiety over Fed’s rate hike sours market mood

• EUR/USD is eying a test of 1.0500 as the risk-off impulse intensifies.
• Fed’s rate hike announcement on Wednesday has sidelined the risk-sensitive currencies.
• Germany’s support for Europe’s embargo on Russian oil has renewed the fears of recession.

The EUR/USD pair is scaling lower after a flat opening on Monday. The asset has displayed a bearish open test-drive session as the asset moved strongly higher to 1.0553 posts a flat opening but faced intense selling pressure in the initial few ticks and tumbled below the opening price to a low of 1.0517.

The shared currency is facing a lot of pressure against the greenback as the uncertainty ahead of the monetary policy announcement by the Federal Reserve (Fed) on Wednesday has strengthened the negative market sentiment. Risk-perceived currencies are facing a lot of heat while the greenback’s safe-haven appeal is streaming firmly. The euro has been battered to a higher risk of recession as Germany has withdrawn its opposition to an embargo on Russian oil. Germany is ready to prohibit oil imports from Russia by the end of summer. It is worth noting that Europe addresses around 30% of its oil requirements from Russia and finding an alternative won’t be a cakewalk. Therefore, the time lag required to shift to other suppliers would dent the employment in the eurozone.

Meanwhile, the US dollar index (DXY) is scaling gradually higher as investors are channelizing their funds into the asset. The asset is establishing above 103.40 on expectations of a mega-rate hike announcement by the Federal Reserve. Liquidity in the economy is set to tighten extremely as the Fed is likely to tantalize the massive balance sheet and dictate the roadmap of achieving neutral rates by the end of this year.