Euro slides below 99 cents
On Monday, the euro sank below 99 cents for the first time in 20 years as Russia announced an indefinite shutdown of its main gas supply pipeline to Europe. The euro was trading at roughly 0.9913 against the US dollar. The dollar index, which compares the US to six other currencies, also touched a new two-decade high as the British pound fell on concerns about energy supply and European economic growth.
Gazprom, the Russian energy supplier, announced it would not continue supplying natural gas to Germany via the critical Nord Stream 1 pipeline due to a failing turbine. The declaration came just hours after the Group of Seven economic giants agreed on a deal to control Russian oil prices.
On Monday morning, the front-month gas price at the Dutch TTF hub, a European benchmark for natural gas trading, was roughly 30% higher, reaching 279.5 euros per megawatt hour.
It comes ahead of the European Central Bank’s meeting on Thursday, when economists anticipate it to hike its benchmark deposit rate from 0% to 0.5% or 0.75% amid concerns over Europe’s ability to satisfy its energy needs this winter and the possibility of a knock to growth.
The pound was trading at 1.1568 against the dollar as the United Kingdom prepared to make a leadership announcement.
Currencies
Sterling lost 4.6% versus the dollar in August, its worst month since Brexit. One analyst predicted that due to political and economic uncertainty, it will “plumb new depths,” potentially reaching $1.15 by the middle of next year.
A higher currency may be disinflationary for the US economy, implying that the Federal Reserve may not need to be as active in raising interest rates in the future.
Major investment firms have reduced their yuan estimates as the currency’s collapse against the dollar intensifies, with some anticipating the yuan to breach the 7-per-dollar mark before next month’s politically delicate Party Congress, despite efforts by officials to prevent the plunge.
The yuan has fallen 2.6% against the dollar in the last three weeks, hitting a two-year low of 6.9350 on Monday, and is down more than 8% year to date, weighed down by both global dollar strength and China’s deteriorating economic slump.
