The euro reached for a brief moment, this Tuesday, July 12, 2022, parity with the US dollar for the first time in two decades, weighed down by the threat of a Russian gas supply cut-off in the European Union.
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Investors favored the greenback, which has gained almost 14% since the beginning of the year and briefly traded at a dollar for a euro, its highest level since December 2002.
The single European currency stabilized against the greenback, at 1.0050 dollars, up 0.10%. But the respite for the euro could be short-lived.
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Several analysts predict that the euro will fall below one dollar, something not seen since December 2002.
The market fears an aggravation of the energy crisis in Europe due to the interruption of the supply of Russian gas that arrives through the Nord Stream 1 Pipeline, currently under maintenance.
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This situation fuels fears that there a recession in Europe.
Gas from Russia is in the “center of the storm in Europe” and the announcement that Canada will return turbines to Germany to alleviate the energy crisis with Russia “did not have a positive impact“, said the analyst Jeffrey Halley, of the firm Oanda.
the russian giant Gazprom began, on Monday, July 11, maintenance works on the Nord Stream 1 gas pipeline, which transports gas directly from Russia to Germany.
European countries are waiting to find out if Moscow will restore the supply after the works, scheduled for 10 days.
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“The key issue is whether the gas will return after July 21. The markets seem to have already made up their mindsHalley pointed out.
For Mark Haefele, an expert at UBS, a suspension of Russian gas supply in Europe “would cause a recession in the entire euro zone with three consecutive quarters of contraction of the economy“.
The European Central Bank (ECB), then, it could find itself in difficulties if it wants to end its expansionary monetary policy and move on to a contractionary phase to fight against the runaway inflation that is aggravating the situation.
(See: Latin American countries with the worst devaluations against the dollar in 2022).
For its part, the issuer of the dollar, the Federal Reserve (FED), has more wiggle room to keep raising rates as recently released jobs numbers proved the US economy is more resilient for now.
The dollar has registered historical prices.
The data on inflation in Germany, France and the United States could fuel investor concern.
“If inflation in the United States is stronger than the market expects, it could benefit the dollar“as investors bet the Fed will have to go even faster to raise rates,” said Fawad Razaqzada, an analyst at Forex.com.
The dollar also shone against other currencies considered vulnerable to risk. the pound sterling plummeted to $1.1807, a level not seen since March 2020, when the start of the new coronavirus pandemic in Europe, in the midst of Brexit negotiations, sent the British currency falling to its lowest level since 1985 .
AFP
