Euro drops ahead of German Inflation

Apr 28, 2022 05:41

  • Russia’s Gazprom (GAZP) halted gas supplies to Poland and Bulgaria, EU energy groups prepare to pay for Russian gas in roubles.
  • The greenback remains attractive due to increasing concern over global growth amidst China’s lockdowns and aggressive Fed rate hike bets.
  • Additionally, the US dollar remains supported following the USD/JPY upsurge. 


The Euro is trading lower against its rival US dollar during Thursday trading session as the energy crisis in Europe hamstrung the euro.

Russia has cut off gas supplies to parts of the region. Russia’s Gazprom (GAZP) halted gas supplies to Poland and Bulgaria on Wednesday over their failure to pay in roubles, cranking up an economic war with Europe in response to Western sanctions imposed for Moscow’s invasion of Ukraine.

As per the Financial Times (FT) reports, Energy companies in Germany, Austria, Hungary and Slovakia are preparing to comply with a new payment system for Russian gas sought by the Kremlin, threatening the European Union’s (EU) unity and sanctions.

China’s covid-19 outbreak and the escalating Ukraine war crisis has hampered the market mood, favoring the safe-haven dollar. China enacts lockdowns in a bid to stem the spread of COVID-19 and Beijing has ramped up mass testing for COVID-19. Additionally, the conflict between Ukraine and Russia appears to be extending longer than expected.

Meanwhile, Expectations of 50 basis points at the Fed’s May 3-4 meeting also favors the USD. WIRP suggests 50 bp hikes at the May 3-4 and June 14-15 meetings are fully priced in, with nearly 25% odds of a possible 75 bp move in June.

The recent news favoring the greenback is the surge in USD/JPY as the Bank of Japan’s (BOJ) decision to stick with its ultra-loose monetary policy decision, despite a weaker yen and rising inflation.

EUR/USD 4 Hour Chart:

Support: 1.0494 (S1), 1.0434 (S2), 1.0353 (S3).

Resistance: 1.0634 (R1), 1.0715 (R2), 1.0775 (R3).

Investors will watch out for the German Preliminary Inflation data following a bunch of sentiment reports from the bloc. The key catalyst for Thursday is the US Q1 advance GDP release, which is likely to show slowing growth in the world’s biggest economy. In the meantime, we expect a bearish trend for EUR/USD.

Loading spinner