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Euro above parity by a thread

Euro above parity by a thread

It looks like July 2022 could be a memorable month for euro, but unfortunately not for the right reasons. EUR/USD is within a risk of dropping below parity with USD since 2002, at that time EUR was just three years old. In North American session, EUR/USD is trading at 1.008, down 1.00%.

The euro and all other majors are seeing red against USD today. This is because of the surprisingly strong non-farm payroll report on Friday, the June gain if 381 thousand surpassed the May reading of 336 thousand and easily beat the sonsesus of 240 thousand. The unemployment rate is at 3.6%, while wage growth grew by 0.3%. The solid employment report has raised expectations of another 75bn hike by the Fed by the end of July.

The ECB will hold its policy meeting on 21st July six days ahead of Federal Reserve. The ECB hike rate is expected to be lift off in this meeting, and another increase is expected in September. ECB interest rates are in negative territory, and a modest 0.25% hike, the most likely scenario at the July meeting, may not be much of a boost to euro, however the perception that the ECB finally tightening will provide some support to the ailing currency.

Today, Germany releases ZEW Economic Sentiment. The index has been mired in negative territory for months, indicative of strong pessimism about the economic outlook. In June, the index came in at -28.0 and this is expected to worsen to -40.0 in July.