EUR/USD takes out 1.09 the figure, Fed minutes eyed

• EUR/USD is under pressure on a combination of weighty fundamentals
• Bears move in for the kill, forcing the euro to below 1.09 the figure. 

EUR/USD has been under pressure in Asia as markets are trading risk-off and the dollar continues higher on the bud, extending the overnight gains. The euro has dropped to a low of 1.0890 from the 1.0908 highs of the session. 

The prospect of the Federal Reserve quickly reducing its debt holdings was whipped up in the early stages of the Us session on Tuesday at the same time that fresh sanctions are being imposed on Russia. The combination of that coupled with terrible Chinese Services data has knocked the wind out of markets in Asia.

Fed's Brainard stated on Tuesday that containing inflation is "critical," adding that the central bank may begin rapidly reducing its balance sheet as soon as May. Investors are concerned that a more restrictive US central bank will ultimately cause a recession. 

Meanwhile, activity in China's services sector imploded at the sharpest pace in two years in March. The Covid infections have ultimately restricted mobility and weighed the demand for services. China's Caixin services PMI for March came in at 42.0 vs. 53.0 expected and 50.2 last, showing that the country’s services activity contracted on coronavirus outbreak-induced lockdown measures.

On Tuesday, Chinese authorities extended a COVID-19 lockdown in Shanghai to cover all of the financial centre's 26 million people, despite growing anger over quarantine rules in the city.

As a consequence of this toxic mix of fundamentals, an Asia-Pacific stock index fell about 1.5%, led by Japan and Hong Kong, which reopened after a holiday. Futures in the US and Europe also fell as a result of a drop in Wall Street stocks.

Meanwhile, the release of minutes from the Fed's last policy meeting is out later in the US session on Wednesday. These are expected to scrutinise for clues on the prospect of a 50 basis point hike in May. '' 'The FOMC pull no hawkish punches in its policy guidance, with Chair Powell also hinting further information about QT plans will be provided in the minutes (possibly including caps details). We continue to expect an official QT announcement at the May FOMC meeting,'' analysts at TD Securities said.