Euro low against dollar: The single currency at a 20-year low against the dollar.
The energy crisis in Europe and the Fed's monetary policy are weighing on the European single currency.
But how far will the single currency sink? The euro plunged below parity with the dollar on Monday, to the lowest level in almost 20 years, caught between a major energy crisis in Europe and, in the United States, a Fed still offensive to curb inflation.
By 20:15 a.m., the euro was losing 1.05% to $0.9932, a low since December 2002. The single currency had already fallen below parity for the first time in mid-July.
Euro low against dollar
The announced closure, for maintenance, of the Nord Stream 1 gas pipeline, which supplies most of Russia's gas to Europe, between August 31 and September 2, has further heightened fears of shortages on the Old Continent, and caused natural gas prices in Europe to take off. "This increases the risk of a significant economic slowdown by the end of the year" in the eurozone, says Shaun Osborne of Scotiabank.
"The sword of Damocles hanging over Europe is gone to stay there," warns Kit Juckes, analyst at Societe Generale. Above all, the week threatens to be even more painful for the euro, because "bad PMI indicators on Tuesday could be enough to anchor the euro under a dollar," he warns.
This development puts the European Central Bank in a "very difficult" situation, notes Erik Nelson of Wells Fargo. A rise in its key interest rate at its next meeting on September 8, expected at half a percentage point, would "support the euro a little", "but with the risk of aggravating the economic situation" in the zone.
Euro low against dollar facts
And even daring a new half-point increase as the market expects, after a similar increase in July, the ECB would not fall behind the Fed, which traders now see raising rates by 0.75 percentage points for the third time in a row in September.
"People expect Fed Chairman (Jerome) Powell to adopt a speech perhaps a little more offensive than in July" during his address, scheduled for Friday. In addition to the continuation of the tightening, the official could insist on "the probability that inflation will remain high for a while, (...) and that rates will remain high for some time too," says Shaun Osborne. After having expected a possible Fed rate cut during the first months of 2023, the market is no longer considering it until the end of next year.
All these uncertainties therefore do not make it possible to fully anticipate the evolution of prices. Some analysts see the euro slipping even more as the cold season arrives, including Nomura, which is talking about the single currency at $ 0.95 by October, or even below it. But for Shaun Obsorne, "the dollar has already gone very high and we are not convinced that it will go much further in the medium term".
# Euro low against dollar #
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Euro: The dollar is back a few moments above the European currency
The levels reached by the euro have not been observed since July as the Euro low against dollar!
The dollar rose a few moments on Monday above the threshold of one euro, the greenback taking advantage of the determination of several members of the US Federal Reserve (Fed) to tighten their monetary policy.
While the European economy will suffer from the jump in energy prices, which will limit the room for maneuver of the European Central Bank and the Bank of England, the euro lost around 8:20 GMT (10:20 a.m. in Paris) 0.35% to $ 1.0000, after falling to $ 0.9994, and the pound 0.33% to $ 1.1790, levels more seen since mid-July. The euro is nearing its lowest of the year, at $0.9952. If the single European currency falls below this threshold again, it will move at a rate more observed since 2002, the year it was put into circulation.
On the American side, if some foreign exchange traders had bet that the Fed would slow down the pace of its hikes, several officials of the monetary institute tried to convince them that the rise in rates would continue. "A new opportunity for the Fed to convince the market will be the Jackson Hole Symposium" at the end of the week, comments Ulrich Leuchtmann, analyst at Commerzbank. At this meeting of central bankers, the Fed boss will speak on Friday.
On the European side, "Europe is preparing for a new closure of the Nord Stream 1 gas pipeline later this month," Craig Erlam, an analyst at Oanda, reminds AFP. Gas giant Gazprom has warned that gas deliveries will be halted for "maintenance" from August 31 to September 2, at the risk of rekindling fears of a shortage in Europe, where Russia is accused of energy blackmail.
As a result, the price of European gas (Dutch FTT futures contract) soared again and reached 292,995 euros per megawatt hour (MWh) on Monday, approaching the historical records reached in the first days of the invasion of Ukraine by Russia.
