After yesterday’s unstable price swings, the USD recovers solid positive traction, consequently affecting the EUR/USD pair. Furthermore, the USD Index, which measures the dollar’s performance against other currencies, strikes a new 20-year peak and is well supported by other hawkish stances implemented by the Fed.
This development has caused the EUR/USD pair to experience new trading pressure today. As a result, it falls to its lowest level, similar to the October 2002 fall, around the 0.9765 region during the early European session.
It is noteworthy that the US central bank announced on Wednesday that it would probably continue with aggressive rate increases to tackle inflation. Their decision, coupled with the predominant risk-off environment, proffers further support to the dollar’s security. However, the market sentiment remains weak amid increasing fears about a more profound global economic slump.
After President Vladimir Putin of Russia’s announcement of partial military deployment, the euro is facing the possibility of a further increase in geopolitical tensions. Moreover, the energy crisis in Europe can also drag the region’s economy deeper into recession, thus affecting the currency pair.
The worse-than-expected flash Manufacturing PMI prints released from France and Germany, the Europe’s two largest economies, increased the market fears. Today’s nose dive can also attribute to some technical trading below the 0.9800 round-figure mark, which might have already positioned the pair for further losses.