On the afternoon of September 5, the euro against the US dollar suddenly plunged, falling below 99 cents , the first time in 20 years. As of press time, the euro fell to USD 0.9886, the lowest level since December 2002, with an intraday decline of 0.6%.
At the same time, major European stock index futures also suffered kill . European Stoke 50 index futures fell 3.3% at one point and are currently trading around 3433 euros.
As bears are prevalent, the European energy crisis is intensifying. On Friday, September 2 local time, Russian natural gas giant Gazprom announced that Nord Stream 1 was unable to resume gas transmission on Saturday as planned due to new technical problems discovered during maintenance. Gazprom did not disclose when the Nord Stream pipeline will be restarted, but emphasized that the natural gas transportation of the Nord Stream pipeline has been completely stopped until the fault can be completely eliminated. This move was interpreted by the market as a signal that Russia has long cut off supply of European natural gas.
In response to this, Australian National Bank foreign exchange strategist Rodrigo Catril said:
Given that Russia's indefinite reduction of European natural gas supply has not yet arrived, the euro still has room for downward.
No gas means no growth (economic) and the ECB cannot stick to a hawkish stance.
is gradually moving towards out-of-control energy crisis will inevitably cause a huge drag on the economy. However, the worst inflation in history is making the European Central Bank monetary policy go to a more difficult situation. Data released last week showed that the eurozone's reconciliation CPI rose 9.1% year-on-year in August, and the core reconciliation CPI rose 4.3% year-on-year, both of which set new record highs.
High inflation and recession are pushing ECB President Lagarde into a dilemma. The European Central Bank will announce its monetary policy interest rate decision this Thursday. Currently, most institutions expect the European Central Bank to raise interest rates by . . This includes major banks Goldman Sachs, JPMorgan Chase and Bank of America .
RBC Australia's economy and fixed income department head Su-Lin Ong said:
At some point, the market may start to question how much inflation is willing to tolerate if the economy falls into a recession, especially if inflation is fundamentally supply-driven.
Sluggish growth or even recession and weak labor markets are ultimately the price to pay, but long-term rise in energy prices may reduce the ECB's rate hike this week and throughout the cycle.
Where will the euro go in the future lies in the direction of the European energy crisis. European countries are currently introducing aid programs to cope with soaring energy prices.
The German government announced last Sunday that it would impose profit tax on energy producers and use the income to fund a 65 billion euro package of aid package. On the same day, the Finnish government announced that it would provide 10 billion euros in loans and credit guarantees to the country's power companies to ensure that they are cash and resources are sufficient. Sweden announced on Saturday that it provided $23 billion in emergency assistance to its utilities to avoid a financial crisis. In addition, this Friday, the EU will hold an emergency energy conference to discuss how to deal with the soaring gas and electricity prices.
. Before European countries announced various bailout plans, Goldman Sachs' Kamakshya Trivedi analyst team said in a report that they lowered their exchange rate expectations for the next three months from 99 cents to 97 cents. They also believe that the euro and the U.S. dollar exchange rate will remain below par for the next six months, after the previous forecast was that the euro would rebound to $1.02. Goldman Sachs said:
Although euro zone has made good progress in the upcoming winter gas reserves, it comes at the expense of major demand damage caused by production cuts and does not completely eliminate the risk of more serious disruptions in winter.
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