EURUSD has extended its decline below 1.0850 as the risk-off urge has increased.

EURUSD pair has proceeded to fall below 1.0850 after a period of heavy selling by market participants around 1.0860. As the US Dollar Index (DXY) recovered dramatically after correcting to around 101.80.the shared EURUSD  Pair fall was met with large bids.

Eurozone GDP might shrink as well following in the footsteps of German GDP.

According to Rabobank analysts, “we continue to believe that, given the weakening impetus of inflation, the Federal Open Market Committee (FOMC) is likely to halt at a 4.75-5.00% target range for the balance of the year.”

Investors in the Eurozone are also anticipating the European Central Bank’s interest rate announcement (ECB). Rising labor costs and inflation rates above 9% continue to worry ECB President Christine Lagarde.

According to the consensus, the ECB President will please to announce a 50-basis point increase in interest rates to 2.50%.But, first and foremost, preliminary Eurozone GDP (Q4) figures will be scrutinized. On a quarterly basis, the economic data is expected to be 0%, compared to the previous release of 0.3%. While annual GDP may fall to 1.8% from 2.3% previously estimated. Investors should brace themselves for a fall in Eurozone GDP. After the German economy announced a 0.2% decline on Monday, instead of the predicted flat reading.

Fed is expected to raise interest rates by 25 basis points, while the ECB is expected to raise rates by 50 basis points.

Investors are concerned that future interest rate rise announcements by Fed Chair Jerome Powell could dramatically  recession worries. The USD Index has rebounded considerably as the market anticipates a 25-basis point (bps) interest rate rise. The path to price stability is far from complete. In the United States, the current inflation rate is three times higher than the planned rate of 2%.

As a result, the Fed cannot cease raising interest rates at this moment. Aside from the policy decision, investors will be paying close attention to the interest rate outlook.