EUR/USD clings to one-month low under 1.0100 on recession fears, hawkish Fedspeak

EUR/USD dribbles around 1.0090 during the sluggish Asian session on Friday, after crashing to refresh monthly low the previous day. The major currency pair recently bear the burden of a firmer US dollar, as well as grim economic concerns at home.

The US dollar jumped to the highest levels in one month late Thursday as price-positive numbers from Philadelphia Fed Manufacturing Survey and the weekly Initial Jobless Claims rejected the US recession fears. The activity gauge rallied to 6.2 for August versus -5 expected and -12.3 prior while the weekly jobless claims dropped to 250K, below 265K market consensus and 252K revised prior. With this, the US Dollar Index (DXY) refreshed its monthly high to 107.56, at 107.51 by the press time.

Hawkish Fedspeak and economic concerns surrounding China, as well as Europe, also contributed to the DXY strength, mainly due to the greenback’s safe-haven demand. San Francisco Fed President Mary Daly mentioned that they (Fed) will continue to raise the rates to "right-size it." The policymaker added that either 50 basis points or a 75 basis points hike would be appropriate while signaling the move for the September rate decision. However, Minneapolis Federal Reserve Neel Kashkari mentioned that, per Reuters, he does not believe the county is currently in a recession. Further, the all-time hawk St. Louis Fed President James Bullard said he is leaning towards another 75 bps rate hike in September.

Goldman Sachs and Nomura both cut the dragon nation’s growth forecasts after witnessing the latest jump in the covid numbers. Also negatively impacting the Chinese economy are the doubts over the People’s Bank of China’s (PBOC) capacity to tame recession woes. Additionally, comments from the US Trade Representative’s office stating, “Early this autumn, the US and Taiwan will begin formal negotiations on a trade initiative,” seem to renew the fears of the US-China tussle and also roil the mood.

“The economic outlook for Germany, Europe's largest economy, is gloomy due to energy price rises and supply chain disruptions,” the German Finance Ministry said in its August monthly report, per Reuters.

Elsewhere, ECB executive board member Isabel Schnabel said on Thursday, "Recession on its own would not be enough to control inflation." The policymaker also backed the regional central bank’s current policies. Following that, ECB Governing Council member Martins Kazaks said in an interview with Latvia’s TV3 on Thursday, “the ECB will continue to hike interest rates to tame inflation,” per Bloomberg.

Against this backdrop, Wall Street closed mixed and restrict the S&P 500 Futures while the US 10-year Treasury yields retreated from their monthly high to 2.875% by the press time.

Looking forward, Germany’s Producer Price Index (PPI) for July, expected 32% YoY versus 32.7% prior, will decorate the calendar. However, major attention will be given to qualitative catalysts for better trade-related decision-making.

Technical analysis

A clear downside break of a three-week-old ascending trend line, around 1.0180 by the press time, keeps EUR/USD bears hopeful of revisiting the yearly low of 0.9952.