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Euro US Dollar (EUR/USD) Exchange Rate Softens amid Growing Eurozone Recession Fears

Euro and US Dollar banknotes

Euro US Dollar Exchange Rate Subdued as Energy Crisis Weighs on Sentiment

The Euro US Dollar (EUR/USD) exchange rate is edging lower as looming energy crisis overshadows despite better-than-expected Eurozone data.

At time of writing the EUR/USD exchange rate is trading around $1.0232, a 0.15% drop from this morning.

Euro (EUR) Quiet amid Mounting Recession Fears

The Euro (EUR) is under renewed pressure today despite an unexpected rise in German industrial production, limiting any further losses for the single currency.

Europe’s largest economy Germany beat forecasts and saw an unexpected rise in industrial output for the month of June. Despite a myriad of issues including supply chain problems and increasing energy prices, industrial production edged up 0.4% MoM for the month of June. The rebound comfortably beat forecasts of a 0.3% slump amid easing restrictions in China.

However, lingering fears of a looming recession hang over the Euro today, capping any gains. Worsening retail sales and manufacturing PMI from earlier in the weak are all weighing on the single currency as fears of an energy crisis are also exerting downward pressures.

Since Russian state-controlled gas supplier Gazprom have slowed gas flows to Europe through the Nord Stream 1 pipeline, EU leaders have been increasingly concerned of a gas shortage this winter. Unless alternatives can be sourced, a gas shortage this winter would certainly tip the Euro area into a recession.

US Dollar (USD) Strengthens Modestly Ahead of Key Jobs Data

The US Dollar (USD) is finding moderate support today as the market awaits to the release of crucial jobs data. With a hawkish stance held by the Federal Reserve, future rate hikes will hinge on the strength of the jobs market.

Despite inflation soaring, Fed Chair Jerome Powell maintains his belief that a tight labour market can support the US economy and further interest rate hikes. If data prints lower than expected, or hints at a cooling labour market, the US Dollar could sink.

Meanwhile, the controversial visit by US House of Representatives Speaker Nancy Pelosi to Taiwan has angered Beijing officials. Geopolitical tensions continue to brew since China warned Pelosi and the US that a visit to Taiwan will ‘undermine China’s sovereignty’. China’s Foreign Ministry issued a statement condemning the visit:

‘Ms. Pelosi had disregarded China’s concerns and resolute opposition to her visit to the self-ruled island, which Beijing claims.

‘Ms. Pelosi’s visit is provocative and said it undermines China’s sovereignty and territorial integrity. Sanctions would be imposed on Pelosi and her immediate family.’

Euro US Dollar Forecast: Strong Jobs Date to Bolster the US Dollar?

All eyes will be on the release of key US jobs data later in the session. If unemployment remains steady or tracks lower, signs of a tight labour market could bolster the ‘Greenback’ on increased bets of future rate hikes.

Elsewhere, a lack of data will leave the Euro open to market sentiment. With recession fears unlikely to dissipate and multiple headwinds likely to linger, the single currency could slide further.