This week, the docket has seen several tier-1 data releases from the eurozone. Germany August ZEW economic sentiment index continues to print negative at 55.3, this is seen leading manufacturing surveys lower, the S&P Global Mfg PMI for the eurozone is already throwing readings below 50.0 as of July. Prospects for growth are uncertain on how energy supply, droughts and the ECB tightening policy will help a soft landing. The ECB has consistently repeated that a recession is not their main scenario
Europe terms of trade index continued its decline, and it is close from reaching the March lows as energy imports weigh on the economic outlook. We see the EUR/USD closely following ToT, and detaching from its previously seen 'risk on' characteristics. The euro is not moving in line with the overall risk asset bid. Only this week, equities have extended gains while EUR/USD was offered above 1.03 and moved back below 1.02
If gas prices were to continue surging while growth prospects are revised, this could send EUR/USD back below 1.01
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