EUR/USD defends bids above 1.0250 amid cautious mood

• EUR/USD is finding buyers amid sluggish market conditions.
• Investors turn cautious amid US-Sino tensions, ahead of Fed minutes.
• The European energy crisis deepens as Germany’s Rhine river dry up.

EUR/USD is trading better bid above 1.0250, as buyers seemingly find support from a dismal market mood and sluggish US Treasury yields.

The US rates pause their upswing seen on Friday, as investors seek refuge in the government bonds and the dollar amid looming US-China risks after the former sent a delegation to Taiwan over the weekend even after the contentious visit by House Speaker Nancy Pelosi to the disputed island, which infuriated Beijing.

Further, rising odds of a 50 bps Fed rate hike in September, after easing US inflation pressures, weigh negatively on the yields, with all eyes on Wednesday’s FOMC minutes for fresh insights on the policy path of the world’s most powerful central bank.

Meanwhile, the US dollar is holding steady in early Asian trades, divided between the retreat in the yields and a tepid appetite for riskier assets. The US dollar index is trading flat at 105.61, having rebounded firmly to 105.88 last Friday. Stronger US Michigan Consumer Sentiment data and easing US inflation outlook triggered a sharp rally on the buck, despite solid performance on Wall Street.

On the EUR side of the equation, the gains in the shared currency will likely remain limited amid the deepening European energy crisis. Already, a cut in the Russian gas exports is severely impacting the old continent, with Germany being the worst hit.

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