- The euro resumed its slide on Monday to as low as $0.9934 against the dollar, its lowest level since 2002, as a fresh surge in gas prices heightened worries over the region’s economy.
- The slump reflects concerns about the energy crisis and a broad rise in the dollar turbocharged by expectations the U.S. Federal Reserve will raise interest rates much more aggressively than the European Central Bank.
With winter fast approaching, it’s not just the cold that’s threatening Europe, but a plummeting currency as well.
In July, the Europe’s common currency initially breached parity with the greenback, but has since rebounded.
However, the euro resumed its slide on Monday to as low as $0.9934 against the dollar, its lowest level since 2002, as a fresh surge in gas prices heightened worries over the region’s economy.
The slump reflects concerns about the energy crisis and a broad rise in the dollar turbocharged by expectations the U.S. Federal Reserve will raise interest rates much more aggressively than the European Central Bank.
Traders are now pricing in the odds of a 75-basis-point Fed hike in September at 60%, up from just 50% a month ago.
Economists have said that the rise in gas prices in Europe may crimp industrial production in mainland Europe and push the region into recession.
Widespread fears of gas shortages this winter have led users to try to lock in supplies, pushing up prices even as fears of a severe economic slowdown grow.
Another reason for the latest surge in gas prices was an announcement last week by Gazprom, Russia’s state-backed gas monopoly, that it was planning maintenance on the Nord Stream 1 pipeline to Germany early next month.
There are fears that any maintenance could be used as a pretext for a prolonged shutdown of the line, with Moscow having blamed the capacity reduction on western sanctions interrupting its normal maintenance schedule.
Gas prices in Europe were also responding to a surge in the price of liquefied natural gas in Asia, where state-backed utilities are starting purchases ahead of winter in a “beggar-thy-neighbor” policy that could see Europe be in for hard times in the coming months.
