EUR/USD remains steady, at the brink of parity around 1.0040 as the greenback weakens

• EUR/USD trims some of its Monday losses and clings above parity but just above July’s 10 low.
• Recession fears persist as the US 2s-10s yield curve stays inverted for the second consecutive day.
• Fed’s Barkin is undecided about going 50 or 75 bps in July’s Fed monetary policy meeting.
• EU and German ZEW missed expectations, spurring a EUR/USD fall close to parity.

The EUR/USD bounces off fresh 20-year lows around the parity area, trimming some of Monday’s losses, as market sentiment wobbles, reflected by US equities fluctuating between gainers and losers, ahead of the US June Consumer Price Index (CPI) to be released on Wednesday.

At 1.0052, the EUR/USD grinds higher after tripping towards 1.0000, during the European session on worst than expected German data, followed by a jump towards the daily highs around 1.0073, 10 pips shy of the 50-hour EMA around 1.0082, which put a lid on upward EUR/USD prices.

EUR/USD rises despite investors’ fragile mood

The market mood is mixed, as portrayed by US equities fluctuating as recession fears persist. The US 2s-10s yield curve stays inverted for the second time in the week, reaching -0.107%, a level last seen in 2007. Meanwhile, the US Dollar Index, a gauge of the greenback’s value, takes a breather, down 0.20% at 107.986, a tailwind for the EUR/USD, which dropped close to the parity on weaker than expected EU news.

In the meantime, Fed speakers did little to nothing during the New York session to boost the greenback. Richmond’s Fed President Thomas Barkin said that he was reserving judgment on a 50 or 75 bps rate hike in the July meeting and reiterated that he would like real rates positive across the curve. Furthermore added that a negative Q2 GDP would take it “seriously” while adding that he expects another elevated inflation report.

The White House (WH) expects US CPI to remain elevated but downplayed recession worries in a memo reported by Reuters. The White House added that the “Impact of energy and food prices on annual headline CPI in June will likely exceed 40%, based on market expectations.”

Also read:

• Fed’s Barkin: A path to cool inflation but a recession ‘is possible
• White House: Impact of energy and food prices on annual CPI in June to likely exceed 40%

During the European session, the EU and German ZEW Surveys of Economic Sentiment missed expectations, sparked by the bloc’s energy crisis, supply chain disruptions, and the ECB’s intentions to hike interest rates. according to ZEW President Achim Wambach, “Experts assess the current economic situation significantly more negatively than in the previous month and have further lowered their already unfavorable forecast for the next six months.”

What to watch

The Eurozone economic docket will feature the Industrial Production for the Eurozone and Germany’s Inflation Rate. Across the pond, the US economic calendar will report June’s inflation rate, expected at 8.8% YoY, while core CPI is estimated at 5.8% YoY. Later, EUR/USD traders will get some clues in the Fed’s Beige Book, which the Fed uses in its monetary policy meetings.

EUR/USD Key Technical Levels