EUR/USD falls below parity level – Jackson hole casting shadow
The currency pair EUR/USD fell back below the parity mark at the beginning of the new trading week. The fear of further rapid rate hikes by the US currency watchdog has caught up with investors once more today at the latest. Last but not least, the upcoming central banker meeting in Jackson Hole in the second half of the week is casting its shadow.
All eyes on the annual meeting of central bankers – impetus for the euro and the dollar is conceivable
Stockbrokers eagerly await the annual central bankers’ meeting in Jackson Hole (Wyoming), when leading representatives of the most important currency watchdogs come together and discuss future monetary policy. The event takes place from Thursday to Saturday.
Particular attention should be paid to Fed Chair Jerome Powell. From an investor’s point of view, the central question should be how strong the monetary policy headwind might be in the future in order to get the rampant inflation under control once more. Accordingly, it is important to tap the speeches, for example on Friday morning, for relevant information.
Powell’s colleague James Bullard told the Wall Street Journal last week that he favored a 75 basis point hike in interest rates at the upcoming September meeting. Since Bullard is considered an important figure in the ranks of central bankers, the statements on Thursday caused unease in the markets.
China cuts interest rates once more – recession worries are fueled once more
The People’s Bank of China (PBoC) once more cut two of its key interest rates on Monday in a bid to boost the country’s flagging economy. Accordingly, the interest rate for one-year loans was reduced by 5 basis points to 3.65 percent. For real estate loans, the five-year rate was adjusted by 0.15 percentage points to 4.30 percent.
A week ago, the responsible central bank lowered the interest rate for bank refinancing transactions with a one-year term.
The Chinese economy is currently suffering from the so-called “zero Covid measures” in technical jargon, which are being used to combat the rampant coronavirus pandemic.
Last but not least, the real estate market remains a crisis-ridden sector, which has accounted for around 30 percent of gross domestic product in recent years.
Financial problems, various property developers such as Evergrande have led to the fact that numerous construction projects have now come to a standstill in the past few months.
With today’s interest rate cuts, the PBoC wants to try to make real estate more attractive once more.
This might continue for EUR/USD
In addition to the smoldering concerns regarding inflation and interest rates in the western world, there are also increasing fears regarding China, the engine driving the economy.
The central banker event in Jackson Hole should continue to cast its shadow until Thursday. The uncertainty regarding future US monetary policy is currently still tipping the scales.
Meanwhile, the economic concerns from the Middle Kingdom might also continue to unsettle European investors. Should there be a major economic downturn in China, this might hit the euro zone hard.
The slide below the parity mark might also force further sales from a psychological point of view.
