The euro under 0.99 dollars, a first in 20 years with the shutdown of Nord Stream 1.
The euro plunged below $0.99 on Monday for the first time since the end of 2002, as the European currency suffered from fears for the European economy after the announcement on Friday of the complete shutdown of the Nord Stream 1 gas pipeline by the Russian Gazprom.
The euro fell 0.24% to 0.9930 dollars around 3:55 p.m. GMT (5:55 p.m. CET), after falling to 0.9878 dollars, its lowest level 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 targeted Russia’s energy windfall on Friday 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 Europe, would be totally stopped until a turbine was repaired.
This stop is deemed, from a technical point of view, unjustified by the turbine manufacturer Siemens Energy.
“When Russian President Vladimir Putin recognized the separatist regions of eastern Ukraine and sent + peacekeeping + troops at the end of February”, the European currency “had fallen below 1.15 dollars”, and “at each escalation of the conflict, armed or energy, the euro gave up a little more ground”, recalled Kit Juckes, analyst at Societe Generale.
The jump in gas prices and the lack of energy that is looming for the coming winter is undermining the budgets of consumers and businesses alike and threatens to plunge the euro zone into recession.
After brushing 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, a benchmark for the natural gas market in Europe, had plunged last week. It was up again by almost 12% on Monday.
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 on Monday.
Respite unlikely
Conversely, the dollar continues to benefit from its status as a safe haven, which “largely compensates for a slightly less enthusiastic than expected employment report (published) last Friday”, commented Lee Hardman, analyst at MUFG.
It is difficult to predict how far the decline of the euro could lead it, while the currency remains for the moment far from its historical low of 0.8230 dollar in October 2000.
“Some of the bad news is already priced in, but that may just limit the downside; the direction of movement remains down,” warns Juckes.
The pound sterling also faltered, the United Kingdom being particularly vulnerable to fluctuations in the price of gas, the energy on which the country depends.
The British currency fell at the start of the session to $1.1444, 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 to succeed Boris Johnson on Monday, with the immediate challenge of tackling the historic purchasing power crisis gripping the UK.
Its victory, widely anticipated by the markets, did not cause any significant movement in the pound in the middle of the session.
“The markets will scrutinize all proposals on tax and spending, aid to households and businesses are crucial to restore the attractiveness of investment in the United Kingdom,” noted analysts at Sucden.
“The pound needs huge fiscal support given the gloomy outlook, but this support needs to be well directed,” say Deutsche Bank analysts, who point to the risk of a debt crisis similar to that of the 1970s, when the United Kingdom had to appeal to the International Monetary Fund (IMF) to bail out 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