The euro is nearing the brink of parity with the dollar due to fears that Russia will cut gas supplies – Business Live | Business

Markets / July 12, 2022 / DRPhillF / 0

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

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All eyes are on the euro this morning, as the single currency falls to the brink of parity with the US dollar for the first time in two decades.

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Anxiety over poor European growth, and rising fears that Russia might turn off gas supplies are weakening the euro.

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#Euro teeters on brink of #dollar parity amid recession risks

Currency falls as low as $1.0006 Monday, lowest since December 2002 https://t.co/3RFgjfNeg2

— Gulf News (@gulf_news) July 12, 2022

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The euro dropped as low as $1.0006 against the dollar in early trading today, a new 20-year low, compared with above $1.13 at the start of this year.

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Russia turned off the single biggest pipeline carrying gas to Germany on Monday for annual maintenance. That work is expected to last for 10 days, but governments, markets and companies are worried the Nord Stream 1 shutdown might be extended because of the war in Ukraine.

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If Vladimir Putin decides to turn off gas supplies to Europe this winter, countries such as Germany could face gas rationing — potentially forcing industries to suspend work and leaving families struggling to heat their homes.

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Fiona Cincotta, senior financial markets analyst, at City Index, says:

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Fears are rising that Russia may not switch the gas supply back on in 10 days when the works are over. This could cause a recession in Europe.

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CHART OF THE DAY: And Germany counts the days.

Nord Stream 1 pipeline has stopped shipping Russian gas into Germany (just a residual amount still flowing now). It's annual maintenance, scheduled from July 11 to July 21.

Berlin fears the pipeline may never return into service. pic.twitter.com/HCdagmIbGs

— Javier Blas (@JavierBlas) July 11, 2022

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Robert Habeck, Germany’s economy minister, warned on Saturday of the ‘nightmare scenario’ of a permanent halt to the flow of Russian gas.

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“Everything is possible, everything can happen,” Habeck told the broadcaster Deutschlandfunk:

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“It could be that the gas flows again, maybe more than before. It can also be the case that nothing comes.

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“We need to honestly prepare for the worst-case scenario and do our best to try to deal with the situation.”

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Surging energy prices and supply chain disruption due to the Ukraine war had already threatened to push Europe into a recession.

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Investors are also concerned that a growing number of Chinese cities, including the commercial hub Shanghai, are bringing in new restrictions to combat outbreaks of the highly-transmissible Omicron subvariant, BA.5.

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The dollar is benefitting from that uncertainty, plus concerns that US inflation could hit a new 40-year high on Wednesday.

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That could prompt more aggressive interest rate rises, strengthening the US currency, especially after a better-than-expected American jobs report last Friday that calmed recession worries..

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The agenda

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9am BST: Bank of England deputy governor Jon Cunliffe: Speech on crypto market developments at the British High Commission, Singapore

10am BST: ZEW survey of eurozone economic confidence

11am BST: NFIB US Business Optimism index for June

6pm BST: Bank of England governor Andrew Bailey: Speech at OMFIF ‘The economic landscape’

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main events:

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

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All eyes are on the euro this morning, as the single currency falls to the brink of parity with the US dollar for the first time in two decades.

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Anxiety over poor European growth, and rising fears that Russia might turn off gas supplies are weakening the euro.

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#Euro teeters on brink of #dollar parity amid recession risks

Currency falls as low as $1.0006 Monday, lowest since December 2002 https://t.co/3RFgjfNeg2

— Gulf News (@gulf_news) July 12, 2022

The euro dropped as low as $1.0006 against the dollar in early trading today, a new 20-year low, compared with above $1.13 at the start of this year.

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Fiona Cincotta, senior financial markets analyst, at City Index, says:

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Fears are rising that Russia may not switch the gas supply back on in 10 days when the works are over. This could cause a recession in Europe.

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CHART OF THE DAY: And Germany counts the days.

Nord Stream 1 pipeline has stopped shipping Russian gas into Germany (just a residual amount still flowing now). It's annual maintenance, scheduled from July 11 to July 21.

Berlin fears the pipeline may never return into service. pic.twitter.com/HCdagmIbGs

— Javier Blas (@JavierBlas) July 11, 2022

Robert Habeck, Germany’s economy minister, warned on Saturday of the ‘nightmare scenario’ of a permanent halt to the flow of Russian gas.

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“Everything is possible, everything can happen,” Habeck told the broadcaster Deutschlandfunk:

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“It could be that the gas flows again, maybe more than before. It can also be the case that nothing comes.

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“We need to honestly prepare for the worst-case scenario and do our best to try to deal with the situation.”

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Surging energy prices and supply chain disruption due to the Ukraine war had already threatened to push Europe into a recession.

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The dollar is benefitting from that uncertainty, plus concerns that US inflation could hit a new 40-year high on Wednesday.

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That could prompt more aggressive interest rate rises, strengthening the US currency, especially after a better-than-expected American jobs report last Friday that calmed recession worries..

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The agenda

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9am BST: Bank of England deputy governor Jon Cunliffe: Speech on crypto market developments at the British High Commission, Singapore

10am BST: ZEW survey of eurozone economic confidence

11am BST: NFIB US Business Optimism index for June

6pm BST: Bank of England governor Andrew Bailey: Speech at OMFIF ‘The economic landscape’

filters (experimental)

European stock markets are set to open lower, as concerns about growth and potential disruption to gas supplies weigh on the markets.

EUROSTOXX 50 FUTURES DOWN 0.9%, DAX FUTURES DOWN 0.9%, FTSE FUTURES DOWN 0.6%, IBEX FUTURES DOWN 0.85%

— *Walter Bloomberg (@DeItaone) July 12, 2022

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EUROSTOXX 50 futures are down 0.9%, DAX futures are down 0.9%, FTSE futures are down 0.6%, IBEX futures are down 0.85%

– * Walter Bloomberg (@DeItaone) 12 July 2022

#BTGraphics | The euro fell as low as $1.0006 against the US dollar causing worry for the Asian markets too.

— Business Today (@business_today) July 12, 2022

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The next few weeks could be tough for Europe, with maximum uncertainty likely to extend into August, he warns Steven Inespartner manager at SPI Origin Management.

Investors increasingly believe gas may not start flowing through Nord Stream 1 again after scheduled maintenance on July 11-21, with more “temporary” outages likely.

If so, Germany will likely have to move to the third stage of its gas emergency plan sometime in August, which would mean rationing and forced shutdowns of chemical and other production parts, which could reduce a few percentage points of German GDP.

Euro at 20-year low, to within one cent of parity with the dollar. High inflation and the prospect of an energy shortage—should Russia cut off Europe’s gas supply this winter — raise prospect of recession. Euro was trading at around $1.15 in February

— Andrew Neil (@afneil) July 12, 2022

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The euro is at a 20-year low, within a cent of parity with the dollar. High inflation and the potential for energy shortages – if Russia cuts gas supplies to Europe this winter – increase the likelihood of a recession. The euro traded at around $1.15 in February

– Andrew Neil (@afneil) 12 July 2022

Introduction: the euro is on the brink of parity with the dollar

Good morning, and welcome to our renewed coverage of business, the global economy, and financial markets.

All eyes are on the Euro this morning, as the single currency is on the brink of parity with the US Dollar for the first time in two decades.

Concern about weak European growth, and growing fears that Russia may cut off gas supplies are weakening the euro.

#Euro teeters on brink of #dollar parity amid recession risks

Currency falls as low as $1.0006 Monday, lowest since December 2002 https://t.co/3RFgjfNeg2

— Gulf News (@gulf_news) July 12, 2022

The euro fell to as low as $1.0006 against the dollar in early trading today, a new 20-year low, compared to over $1.13 at the start of this year.

EUR/USD exchange rate over the past 20 years Photo: Refinitiv

Russia shut down its largest single gas pipeline to Germany on Monday for annual maintenance. This work is expected to last for 10 days, but governments, markets and companies are concerned about the possibility of extending the Nord Stream 1 shutdown due to the war in Ukraine.

If Vladimir Putin decides to cut off gas supplies to Europe this winter, countries like Germany could face gas rationing – which could force industries to suspend work and leave families struggling to heat their homes.

Fiona CincottaSenior Financial Market Analyst, at city indexSays:

Concerns are growing that Russia may not restart gas supplies within 10 days when the work is finished. This could cause an economic recession in Europe.

CHART OF THE DAY: And Germany counts the days.

Nord Stream 1 pipeline has stopped shipping Russian gas into Germany (just a residual amount still flowing now). It's annual maintenance, scheduled from July 11 to July 21.

Berlin fears the pipeline may never return into service. pic.twitter.com/HCdagmIbGs

— Javier Blas (@JavierBlas) July 11, 2022

Day planner: Germany is counting the days.

Nord Stream 1 has stopped shipping Russian gas to Germany (the rest is still flowing now). It’s annual maintenance, from July 11 to July 21.

Berlin fears that the pipeline may never return to service. pic.twitter.com/HCdagmIbGs

Javier Blas 11 July 2022

Robert HabeckOn Saturday, Germany’s economy minister warned of a “nightmare scenario” of a permanent halt to the flow of Russian gas.

“Anything is possible, anything can happen,” Habeck told Deutschlandfunk.

“The gas can flow again, maybe more than before. It could also be the case that nothing is coming in.”

“We need to honestly prepare for the worst case scenario and do everything we can to try and deal with the situation.”

Rising energy prices and supply chain disruptions due to the Ukraine war had already threatened to push Europe into recession.

Investors are also concerned that a growing number of Chinese cities, including commercial hub Shanghai, are imposing new restrictions to combat the outbreak of the highly transmissible Omicron drug, BA.5.

The dollar It is benefiting from this uncertainty, as well as fears that US inflation will reach its highest level in 40 years on Wednesday.

This could lead to a sharper rise in interest rates, which will boost the US currency, especially after the better-than-expected US jobs report last Friday which allayed recession fears..

schedule of work

9am GMT: BoE Deputy Governor John Cunliffe: Speech on crypto market developments at the British High Commission, Singapore
10am GMT: ZEW survey of Eurozone economic sentiment
11 am GMT: US NFIB Business Optimism Index for June
6pm GMT: Bank of England Governor Andrew Bailey: Speech at OMFIF ‘Economic Landscape’