The euro under $0.99

The euro below $0.99 for the first time in 20 years with the shutdown of Nord Stream 1.

The euro fell below $0.99 on Monday for the first time since late 2002, as the European currency suffered from fears over the European economy after Russia’s Gazprom announced on Friday that it would shut down the Nord Stream 1 gas pipeline completely.

The euro fell 0.24% to $0.9930 around 15:55 GMT (17:55 CET) after falling to $0.9878, its lowest level since December 2002, the year it was was circulated. Since the beginning of the year, the European currency has lost 13% against the dollar.

The G7 on Friday targeted Russia’s energy gains by agreeing to cap the price of oil, provoking a reaction from Moscow that shook Europeans by announcing that the Nord Stream 1 gas pipeline, vital to Europe’s energy supply, will be fully operational would be stopped until a turbine was repaired.

From a technical point of view, the system manufacturer Siemens Energy does not consider this stop to be justified.

“By the time Russian President Vladimir Putin recognized the separatist regions of eastern Ukraine and dispatched + peacekeepers + at the end of February,” the European currency had “fallen below $1.15,” and “with every escalation of the conflict, whether armed or energetic, the euro has lost a little more ground,” recalls Kit Juckes, an analyst at Societe Generale.

The gas price jump and the looming energy shortages for the coming winter are squeezing the budgets of consumers and companies alike and threaten to plunge the euro zone into a recession.

After beating on August 26 its historic record of €345 per megawatt hour set in March at the start of the war in Ukraine, the Dutch TTF futures contract, a benchmark for the natural gas market in Europe, has been in the collapsed last week. On Monday, it rose again by almost 12%.

The prospect of a significant tightening of monetary policy by the European Central Bank (ECB) at its meeting on Thursday was not enough to strengthen the euro on Monday.

recovery unlikely

Conversely, the dollar continues to benefit from its safe haven status, which “largely offsets a slightly less enthusiastic than expected jobs report (released) last Friday,” commented Lee Hardman, analyst at MUFG.

It is difficult to predict how far the euro’s decline might go while the currency is currently a long way from its historic low of $0.8230 in October 2000.

“Some of the bad news is already priced in, but that may only limit the downside; the direction of movement remains down,” warns Juckes.

Sterling also faltered as the UK is particularly vulnerable to fluctuations in the price of gas, the energy source the country depends on.

The British currency fell to $1.1444 at the start of the session, a new low since the March 2020 lockdown and the shock of the start of the Covid-19 pandemic.

Liz Truss won the race to become Prime Minister and successor to Boris Johnson on Monday, with the immediate challenge of tackling Britain’s historic spending power crisis.

His victory, which was widely anticipated by markets, did not cause the pound to move significantly mid-session.

“Markets will consider all tax and spending proposals, and support for households and businesses is crucial to restoring the UK’s investment appeal,” said analysts at Sucden.

“The pound needs huge fiscal support given the bleak outlook, but that support needs to be well managed,” say analysts at Deutsche Bank, pointing to the risk of a debt crisis like that of the 1970s when Britain had to appeal to the International Monetary Fund ( IMF) to save its coffers.

EUR/USD 0.9930 0.9954

EUR/JPY 139.51 139.55

EUR/CHF 0.9731 0.9766

EUR/GBP 0.8621 0.8648

USD/JPY 140.50 140.20

USD/CHF 0.9800 0.9812

GBP/USD 1.1518 1.1509

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