2 May 2022 • Daily News • 1 min read

EUR/USD Slides as Hawkish Fed Spurs Risk-Off

After a flat opening on Monday, the EUR/USD pair is now trending lower. The asset moved sharply higher to 1.0553 but then succumbed to heavy selling pressure in the first few ticks, plunging below the opening price to a low of 1.0517.

The uncertainty surrounding the Fed’s monetary policy announcement on Wednesday got investors flocking to the safety of the greenback. 

Germany’s withdrawal of resistance to a Russian oil embargo has hammered the euro, raising the possibility of recession. By the end of the summer, Germany plans to be completely independent of Russian oil imports.

Since Europe gets over 30% of its oil from Russia, finding a replacement won’t be a cakewalk. As a result, the time it would take to switch to other suppliers would hurt employment in the eurozone.

Meanwhile, the US dollar index (DXY) is progressively rising higher. The asset is establishing above 103.40 on speculations that the Federal Reserve would announce a massive rate hike.  

The money supply in the economy is only going to dry up as the Fed is set to shrink the huge balance sheet and define a path to neutral rates by the end of the year.

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