LiveWire

The euro faced difficulties holding onto Wednesday's 1.5% gains, falling 0.6% against the dollar this morning. The story is both of a continued European energy crisis and of a strong dollar. With US government bond yields climbing up again this morning, it is adding pressure on the euro, along with stocks, bonds, crypto, and commodities. Members of the ECB are expected to speak today, which could offer investors clues on the next interest rate hike. This afternoon, US GDP and jobless claims could help boost the euro if the US economy shows signs of cooling. 

EURUSD is attempting to rebound after the 0.9550 level withstood further selling pressure. The retreat in US yields is clearly a net positive for the pair as well. 

Stocks climbed from their lowest levels since June, after Treasury yields cooled down their ascent. Sentiment remains extremely bearish, only seen that negative in recent years, during the Covid market crash. A number of US macro data will be released today such as CB Consumer Confidence, New home sales, Durable goods orders, and FOMC members Bullard and Daly will speak.

The euro is paring losses against the dollar as money markets now fully price in a 75-bps ECB rate hike in October. This should help the EURUSD to (at least briefly) rebound from its end-2002 support level. 

Losses for the euro deepened versus the dollar as a result of a rapidly deteriorating global economic outlook. That is despite, the energy situation in Europe improving on the margin. Oil prices have fallen below where they were before Russia invaded Ukraine and European gas prices fell from a peak of near 350eur in August to now near 160Eur. Sentiment and the flight to safety are helping prop up the dollar, which acts as safe heaven as market participants deleverage and sell positions, increasing the demand for the dollar. In the UK, a crisis of confidence that send the pound tumbling also helped push the dollar higher.