European markets set for a mix open ahead of EU Energy Summit

As markets digested more hawkish comments from the Fed on Friday, the dollar took a breather from its surging rally. At the same time, the euro held on to parity thanks to an outsized rate hike from the European Central Bank that helped keep both currencies close to each other.

Despite Jerome Powell reaffirming the central bank's aggressive stance against inflation, currency movements were largely calmer over the past 24 hours, confirming the greenback's dominance over other currencies.

On Thursday, the European Central Bank (ECB) raised its key interest rates by an unprecedented 75 basis points as part of its effort to fight inflation. However, the bloc is likely to slide into a winter recession and gas rationing is more likely than not.

Chart of the day

Despite a 0.9% rise for the single currency this week, which snapped three straight weeks of declines, the currency has still lost more than 10% so far this year. Currently, EUR/USD is poised to test a resistance level of 1.00891. At the same time, the price action on the intraday four-hour time frame has formed a bullish reversal. If this hurdle can be overcome, then we can be on the right track toward the 50-day moving average.

It was kind of like the ECB and Powell cancelled each other out to some extent. Therefore, there was a degree of volatility, but there wasn't much to speak about in the end. Currently, the market seems to be looking ahead to next week's US CPI report, which I think will set the tone in terms of what we can expect from the Fed as far as expectations go.

EU Energy summit

Following the extended recovery on Wall Street, European stock markets are expected to open with modest gains on Friday, ahead of a critical European Union meeting on how to deal with the region's energy crisis. There has been a positive close on Wall Street on Friday, which has helped the mood in Europe. However, gains in the market are likely to be tentative following the meeting of the EU's energy ministers on Friday to discuss how the 27-nation bloc can deal with the energy crisis, including the possibility of agreeing to a price cap on Russian gas imports.

Some of the European countries that rely heavily on Russian gas supplies as winter approaches may find themselves forced to start rationing due to rising gas prices, causing industries to shut down and sending the region into recession.

Events of the day

Friday is likely to be a quiet day on Europe's economic calendar. Still, investors may be looking forward to the French and Spanish July industrial production data for clues as to how the region's industrial base is faring in the face of soaring energy costs.

The US session will focus on Canadian job data, including the employment change in August and the unemployment rate. Employment change is expected to rise by 15K in August after a drastic slump of 30.6K in July.

The unemployment rate will likely climb to 5% after hitting 4.9%, the multi-year record low in July.