Germany’s Finance Minister Christian Lindner said on Wednesday that the economic outlook for the euro area’s powerhouse is fragile.  

Earlier on, Lindner had said that high inflation in Germany was eroding economic foundations.

Germany is bearing the brunt of the Russia-Ukraine war, as the European gas crisis deepens. The economy is on brink of recession, as companies expect significantly worse business activity in the coming months.

Despite growing recessionary fears, the European Central Bank (ECB) remains on track for a 50 bps rate hike at its September meeting. The eurozone money markets now fully price in 50 bps rate increase next month.

Market reaction

EUR/USD is testing bids around 1.0200, seeing renewed selling pressure amid a minor recovery in the US dollar and a risk-off market profile. All eyes remain on the US inflation data for a fresh direction in the pair.