Euro gains momentum against dollar, trades above $1…… ECB and BoE eyeing for half point moves

European economies are suffering as the energy crisis looks increasingly serious and central banks are being forced to withdraw stimulus to try to prevent excess inflation from taking root. Confidence readings go south, prices keep rising and the ECB and BoE remain on track for half-point moves at their next meetings. With markets increasingly concerned that aggressive central bank action will send the global economy into recession, the prospect of further rate hikes has done the Euro no favours. EURUSD fell under equality, at the bottom of 0.9915. Fed Chairman Powell’The comments from the Jackson Hole meeting are the key event for currency markets now and EURUSD this side of his speech will probably remain depressed. Uncertainty about Russia’s gas supply to Europe, along with a major slowdown or even recession in Europe, which would ease inflationary pressures, will keep prices supported.

The S&P Global Composite PMI for the Eurozone fell to 49.2 in the preliminary reading for August. The index provides further evidence that the economy is slipping into recession, although the number was not as bad as feared, largely thanks to an unexpected improvement in German manufacturing. Enthusiasm among service providers after the reopening of the economy quickly gave way to concern about mounting cost pressures and struggles to find staff following pandemic-related layoffs. The manufacturing sector meanwhile reported falling demand on the back of markedly higher prices, although the survey suggested that confidence in the year-ago outlook was not as cautious as in July. However, clearly, with energy shortages looming and the ECB raising rates again, the numbers connect with expectations of contracting activity during the winter. Elsewhere, the UK manufacturing PMI plunged to 46.0, which dragged the Composite down to 50.9 in August from 52.1 in the previous month. The UK composite remains above the 50-point unchanged mark despite the fact that GDP actually contracted in the second quarter. It seems that the survey is finally catching up with the reality of an economy that is already in recession. In short, with markets increasingly worried that aggressive central bank action will send the global economy into recession, the prospect of more rates has not made the Euro or the Sterling any favors Both the ECB and BoE, like other central banks, are in a difficult position as they face slow growth and rising prices. However, with inflation hitting double digits, the risk of second round effects and significant wage growth is even higher in the UK than in the Eurozone. NN: The UK and EU have lagged way behind the US in raising rates. Their currencies have depreciated 30%. We got caught in that slide since we are a UK based entity and our trading currency is the EURO. We as the drop happened spread our Euro trade. As the Euro dropped below a dollar we legged out of the Euro shorts we were holding at .099347.  So afar that looks like a good move since the EURO is trading at 1.00159. We are not out of the woods yet. My bet if we do not have any blow up the pound and euro have put in their lows against the dollars. I look for the central bankers love fest in shit hole (Jackson Hole) will be the perfect time for the UK and EU to confirm their upcoming tightening. They will raise rates and catch up to the dollar. And this plunge will soon be history. And if we guess right very very profitiable.