As USD retreats, EUR/USD steadies at the brink of parity

The EUR/USD pair bounces off fresh 20-year lows around the parity area, trimming some of Monday’s losses, as market sentiment wobbles, reflected by US equities fluctuating between gainers and losers, ahead of the US June Consumer Price Index (CPI) to be released on Wednesday.

The EUR/USD is trading at 1.0052 after tripping towards 1.0000 during the European session on worse-than-expected German data. The pair then jumped towards the daily highs around 1.0073, 10 pips shy of the 50-hour EMA around 1.0082, which put a lid on upward EUR/USD prices.

The market sentiment is mixed, as portrayed by US equities fluctuating as recession fears persist. The US 2s-10s yield curve has stayed inverted for the second time in the week, reaching -0.107%, a level last seen in 2007. Meanwhile, the US Dollar Index, a gauge of the US dollar’s value, takes a breather, down 0.20% at 107.986, a tailwind for the EUR/USD, which dropped close to the parity on weaker than expected EU news.

On the US front, Fed officials did almost nothing during the New York session to boost the US dollar. Richmond’s Fed President Thomas Barkin said that he was reserving judgment on a 50 or 75 bps rate hike in the July meeting and reiterated that he would like real rates positive across the curve. A negative Q2 GDP would take it “seriously” while adding that he expects another elevated inflation report.

The White House expects US CPI to remain elevated but downplayed recession worries in a memo reported by Reuters. The White House added that the “Impact of energy and food prices on annual headline CPI in June will likely exceed 40%, based on market expectations.”