The euro plunged below $0.99 on Monday for the first time since late 2002, as the European currency suffered on fears for the European economy following Friday’s announcement of Russia’s complete shutdown of the Nord Stream 1 gas pipeline. Gazprom.
The euro fell 0.45% to 0.9909 dollars on Monday around 09:00 GMT, after falling to 0.9878 dollars, its lowest since December 2002, the year it was put into circulation. Since the beginning of the year, the European currency has lost 13% against the dollar.
The G7 countries on Friday targeted Russia’s energy windfall by agreeing to cap the price of its oil, provoking a reaction from Moscow that shook Europeans by announcing that the Nord Stream 1 gas pipeline, vital for the energy supply of the ‘Europe, would be totally closed until a turbine was repaired.
The shutdown is considered, from a technical point of view, as unjustified by the turbine manufacturer Siemens Energy. “When Russian President Vladimir Putin recognized breakaway regions in eastern Ukraine and sent in ‘peacekeeping’ troops in late February, the euro-dollar fell below $1.15” , and “with each escalation of the conflict, armed or energy, the euro gave up a little more ground”, recalls Kit Juckes, analyst at Societe Generale.
Soaring gasoline prices and the lack of energy that are looming this winter are weakening the budgets of consumers and businesses alike and threatening to plunge the euro zone into recession.
After touching its historic record of 345 euros per megawatt hour on August 26, set in March at the start of the war in Ukraine, the Dutch TTF futures contract, the benchmark for the natural gas market in Europe, had plunged last week. It was up more than 30% again on Monday morning. In this context, the prospect of a marked tightening of monetary policy by the European Central Bank (ECB) at its meeting on Thursday was not enough to strengthen the euro.
The dollar continues to benefit from its safe-haven status, which “more than offsets a slightly less enthusiastic than expected jobs report on Friday,” commented MUFG analyst Lee Hardman. It’s hard to predict how far the euro’s decline could take it, as the currency for now remains far from its all-time low of $0.8230 in October 2000. “Some of the bad news is already integrated, but this could limit the disadvantages; the direction of the movement remains downwards”, warns Juckes.
The pound sterling also weakened, with the UK particularly vulnerable to fluctuations in the price of gas, the energy on which the country depends.
The British currency fell 0.17% to $1.1490 after falling to $1.1444, a new low since the March 2020 lockdown and the shock of the start of the pandemic. The country is awaiting an announcement on Monday of who will succeed Boris Johnson in Downing Street, amid the UK’s cost of living crisis, where soaring energy prices threaten to plunge two-thirds of British households into poverty. precariousness.
The favorite candidate, the very Thatcherite Liz Truss, has so far refused to promise direct aid to households, calling it “band-aids”, but press reports seem to indicate that she would now favor a freeze on the ceilings of the energy price. “Markets will scrutinize all tax and spending proposals, support for households and businesses is crucial to restoring the attractiveness of investment in the UK,” commented analysts at Sucden. If the pound breaks below the $1.1412 threshold, it will drop to its lowest since 1985.