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Historical Moment For the EUR/USD Reaching Parity
13.07.2022

The EUR/USD officially reached parity for the first time after 20 years. Considering the magnitude of the recent price movement, it's no surprise that the price has slightly retracted upwards shortly after. Since the EUR/USD retraced upwards, the price movement has not managed to maintain momentum and has mainly developed into a sideways trend.

The sideways movement has most likely been triggered by the previous large bearish price action and by traders preferring to wait for confirmations on the latest CPI figures. The US Dollar Index is again higher this morning and is currently hovering at the 108.10 mark.

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Investors’ attention is almost solely on the Consumer Price Index which is scheduled to be released this afternoon. The CPI is predicted to be confirmed as 1.1%, which is 0.1% higher than the previous month and would again result in the inflation rate increasing further. The current level of inflation in the US is 8.6% which is the highest in 40 years.

Over the past 24 hours the US has not released any major economic figures but traders have been following statements made by the Federal Reserve. Yesterday afternoon, Ms. George advised that the central bank has no other option than to act to contain inflation and bring it down to its 2% target. However, she also advised that she does not necessarily believe the bank should increase interest rates by 75 basis points as this may have adverse effects on the economy. However, it should be noted that Ms. George is one of the few Fed bankers which believe that a 75 basis point hike, is a step too far.

Yesterday, the Eurozone's main release was the index of business sentiment in Germany from ZEW (The Centre for European Economic Research) which was published at midday. The indicator fell sharply from -28.0 to -53.8 points which is considered extremely low and even lower than periods where the economy was in lockdown. Businesses in the Eurozone, and especially in Germany, fear serious problems with energy resources as well as interruptions in the supply of components and raw materials. There have also been predictions that Russia may potentially halt the exportation of gas and oil to Europe which can result in shortages and rationing.

The market has also taken into consideration the latest comments made by the Vice-President of the European Commission Mr. Dombrovskis, who said that the growth of the Eurozone economy seems to be stable this year. However, it is likely to decrease towards the end of the year. Inflation forecasts, according to the official, will be revised upwards.

Throughout the day the market will mainly be focusing on the release of June’s CPI figures and monitoring the price action. Traders are eager to see if the price will continue its attempt to stabilize below the parity level.

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