EUR/USD drops to near 1.0660 as risk-off impulse solidifies ahead of Eurozone ZEW Survey

• EUR/USD has slipped firmly to near 1.0660 as the USD Index eyes more upside.
• S&P500 futures are showing losses ahead of the US opening after an elongated weekend.
• The majority of institutional investors are having pessimist view for Eurozone economic projections.

The EUR/USD pair has slipped to near 1.0660 in the Asian session as the risk appetite of the market participants has trimmed ahead of the global PMI figures. Investors are worried that higher interest rates by the majority of central banks in taming the stubborn inflation have impacted the scale of economic activities. Firms have no other option than to tap funding on higher borrowing costs. Therefore, producers are dodging borrowing or limiting them to fulfill the essential requirements.

The major currency pair has witnessed a steep fall after surrendering the 1.0670 cushion and is expected to display more weakness ahead as the US Dollar Index (DXY) has rebounded firmly. The USD Index is shifting its auction profile above 103.70 after a recovery move as the risk aversion theme has improved the appeal for safe-haven assets.

S&P500 futures have reported losses in the Asian session ahead of the opening of the equity markets in the United States after an extended weekend. The weekend was full of geopolitical tensions including the US-China tensions and missile attacks by North Korea near Japan’s Essential Economic Zone (EEC) region. The demand for US government bonds has also dropped, which has led to a jump in the 10-year yields to 3.86%.

Going forward, the release of the Eurozone ZEW Survey- Economic Sentiment will be keenly watched. The sentiment data is seen as negative at 29.7 vs. the positive figure of 16.7 released earlier. A pessimist view from the majority of institutional investors could impact the Euro ahead.

The reason behind the pessimist view of institutional investors could be the hawkish stance on interest rates by the European Central Bank (ECB) President Christine Lagarde and other policymakers. On Monday, ECB Governing Council member Olli Rehn cited “It would be appropriate for the European Central Bank to raise rates beyond March and reach the terminal rate this summer,” as reported by Reuters. He further added that Eurozone may avoid recession and the growth will be around 1%.