EUR/USD Drops Below 1.0000 As Demand For U.S. Dollar Stays Strong

Key Insights

• EUR/USD moves closer to yearly lows as European natural gas prices test new highs. 
• GBP/USD remains under strong pressure at the start of the week amid global market sell-off. 
• U.S. Dollar Index is moving towards yearly highs as traders prefer the safety of the American currency. 

EUR/USD

EUR/USD managed to get below the 1.0000 level and is moving towards yearly lows near 0.9950 amid an energy crisis in the EU.

There are no important economic reports scheduled to be released in the Euro Area today, so traders focus on the developments in the European natural gas markets.

Natural gas prices in Europe tested new highs as Russia’s Gazprom decided to halt supplies via Nord Stream 1 for maintenance. The works should take three days and start on August 31. Traders are left guessing whether the gas would flow again on September 3.

Inflation in the Eurozone will get worse due to high energy prices, but it remains to be seen whether ECB will be able to raise rates at a robust pace as higher rates will deal an additional blow to the economy.

Meanwhile, traders look ready to bet on the continuation of the current downside trend in EUR/USD due to the weakness of the European economy.

GBP/USD

GBP/USD is also moving towards yearly lows. GBP/USD and EUR/USD have been moving in sync in recent trading sessions as traders focused on the energy crisis and its impact of the economies of the UK and EU.

The sell-off in global markets contributed to the weakness of GBP/USD today as traders rushed to the safety of the U.S. dollar. As a result, the U.S. Dollar Index managed to get above 108.50 and continues to move towards yearly highs near 109.30.

Interestingly, GBP/USD is not oversold from a technical point of view despite the recent sell-off. Thus, it has a good chance to settle below the 1.1800 level in case the flight to safety continues.

For a look at all of today’s economic events, check out our economic calendar.