EUR/USD Slides to three week low

The US dollar is showing strong gains against the majors yesterday, with the exception of the Japanese yen. EUR/USD has tumbled by 1.27% and is trading at 1.0528 in Europe.

EUR/USD is sharply lower, despite a very light economic calendar. The only release of note is German CPI, which was released yesterday. Despite the lack of fundamentals, the USD is taking advantage of risk aversion in the markets. There are headwinds everywhere we look. The war in Ukraine, the threat of recession in the US and the eurozone and China’s slowdown all make for a gloomy outlook as we start the new year.

Germany’s inflation has been falling, and the downtrend is expected to continue. The consensus for December CPI is 9.0%, compared to 10.0% in November. If the consensus proves accurate, it could put further pressure on the euro, as the ECB may have to reconsider its hawkish stance on rate policy.

The International Monetary Fund didn’t bring any festive cheer with its pessimistic message on Monday. The IMF warned that 2023 would be tougher than 2022, as the US, EU and China would all see a decline in growth.

After Christmas and New Year’s holidays, the markets are easing back in, as the data calendar gets busier as of Today. We’ll get a look at the Fed minutes from the December meeting, which was a hawkish affair that surprised investors and gave the US Dollar a boost. On Friday, the US release the employment report, which always plays an important factor in the Federal Reserve’s rate policy.