The Euro took a major hit in yesterday’s trading session against the US dollar as ECB President Christine Lagarde spoke with Fed Chair Jerome Powell and the Bank of England’s Andrew Bailey at the ECB’s Central Banking Forum.

Mr Powell reaffirmed the Fed’s commitment to returning inflation to the target of 2%, while also playing down some warning signals that are flashing across markets. Powell reiterated that the US economy remains well positioned to absorb the impact of higher borrowing costs, while also stating that the economy remains strong which gave the Dollar a boost and presented a major headache for the Euro which was then sold off.

The decline in EURUSD has been stark over the last two sessions, as the Euro continues to suffer from hawkish Fed pricing. The exchange rate had benefitted from a slight repricing of US Treasury yields over the last few weeks, as market participants repositioned amid growing recession fears The Fed’s commitment to tightening policy coupled with growing concerns over European inflation and economic performance continue to paint a bearish picture for EUR/USD.

As we enter today’s trading session the picture looks just as bleak,and the Euro continues to drift lower against the greenback and it is hard to see this trend reversing and especially since the conflict between Ukraine and Russia seems to be escalating. The problem is added to by the possibility of an upcoming recession in the Eurozone according to one of the world’s leading ratings agencies.

"The likelihood of gas rationing in Europe has increased significantly following the recent disruption of Russian natural gas supplies through the Nord Stream 1 pipeline," Fitch Ratings said in a report published on Thursday. "A technical recession in the eurozone is now an increasing possibility."