Pengpai News reporter Hou Jiacheng
Due to the pressure of energy supply and the risk of recession dragging down the outlook of euro zone, the downward trend of the euro is rapid and cruel.
htmlOn July 12, the euro was close to parity with the US dollar, and once fell below parity level, reaching 0.9999, the first time in 20 years. At the same time, risk aversion sentiment drove the US dollar to rise across the board. On July 11, the US dollar index stood at the 108 mark, continuing to hit a new high since October 2002.
Euro exchange rate against the US dollar, data source: Wind
In February this year, the trading price of the euro was around US$1.15, and the euro continued to decline since then. Federal 's increasingly aggressive rate hikes measures boosted the dollar, while Russian invasion of Ukraine worsened the growth prospects of euro zone , pushing up the cost of energy imports in the region. Among them, the risks caused by the shortage of natural gas are particularly obvious. European countries are highly dependent on Russia's energy imports. Since the Russian-Ukrainian conflict, the rise in energy prices caused by supply shortages has had a relatively obvious impact on the European economy and has also become the main reason for pushing up inflation in the euro zone.
Cao Yubo, a researcher at the Financial Markets Department of the Head Office of Construction Bank, told The Paper that since July, the euro has continued to depreciate against the US dollar, and after July 5, it has repeatedly hit a new low since 2002 and has fallen below parity. The expectation of the euro zone recession is the fuse of the recent sharp and rapid depreciation of the euro, and the economic differentiation and monetary policy differences in Europe and the United States are the reasons for the continued weakening of the euro. In the short term, the net short scale of the futures market of euro against the US dollar remains high, and the negative news of short forces against the euro may be relatively passive. From a technical perspective, the euro has certain technical support near the parity level, but energy supply pressure, especially whether the maintenance of the largest natural gas pipeline in Russia and Germany can be restored as scheduled on July 21 will become an important observation point for the recent trend of the euro.
From July 11 to 21 local time, the "North Stream 1" natural gas pipeline, the main pipeline that Russia transports natural gas to Europe, will begin annual maintenance. The maintenance work includes testing mechanical components, automation systems, etc. The pipeline has currently suspended gas transmission. In response, Germany is concerned that Russia will continue to close the pipeline after maintenance is over, saying it will prepare for the "worst case".
Germany's Deputy Prime Minister and Minister of Economic and Climate Protection Habek said, "Everything is possible, everything can happen. After maintenance is over, Russia may continue to transport gas to Germany through pipelines, or the gas volume is more than before, and it may not happen. To be honest, we need to prepare for the worst and try our best to deal with the possible problems. We need the Nord Stream 1 to fill our natural gas inventory, which is important not only to Germany, but also to the European market and European gas supply security." At present, plans are being formulated across Germany to deal with the potential extreme situation of Russia's permanent closure of Nord Stream 1.
Deutsche Bank Global Head of Forex Research in London, George Saravelos said that the euro could be predicted to fall below parity when the Nord Stream 1 pipeline "completely shut down natural gas." Even if the gas returns in full flow after the maintenance period, the (risk) premium is unlikely to disappear. The bank currently expects the euro to fluctuate between the 0.95 and parity range.
At the same time, shorting the euro has become one of the most popular trades among Forex professionals.
Scotiabank strategists Shaun Osborne and Juan Manuel Herrera Betancourt released a report saying that the euro position has changed the most weekly compared to other major currencies, with net short positions in the account last week increasing by $769 million to a total of $2.2 billion, the highest level since the end of November last year. Jennifer McKeown, head of global economics services at Jennifer McKeown, said the weakness of the euro has exposed a key constraint facing the ECB, that is, the ECB must address the risk that interest rate hikes may push up bond yields in countries outside the euro zone. Because of this, the focus of the market is whether the ECB can use new anti-fragmentation tools to narrow the bond spread and allow it to continue hikes in response to high inflation.
"People generally think that a weak euro is good for exports, but it has been seen more as a negative factor at the moment. The depreciation of the euro increases the import inflationary pressure, which is something the ECB really doesn't want," McKeown said.
Editor in charge: Zheng Jingxin Photo editor: Hu Mengsai
