EURUSD Falls to New Cycle Lows, Yields Plunge
05 September 2022
For the first time since October 2002, EURUSD fell below 0.9900 today and was down 0.5% during the London session on Monday.
The most traded currency pair worldwide is expected to continue falling toward the region of 0.9600/9650, according to economists at ING.
The broad USD strength has dominated the FX market again, pushing GBPUSD to two and a half years below 1.15, while commodity-linked currencies were also subdued.
At the same time, sentiment worsened notably, benefiting US bonds and pushing their yields notably lower.
EU without gas
A Saturday deadline for the Nord Stream pipeline to restore gas supplies was abandoned when Russia stated over the weekend that one of its key supply pipelines to Europe would remain closed indefinitely. The reason given was an oil spill in a turbine.
Just 20% of the pipeline's capacity was being used when flows were stopped last week for repairs. This action will probably increase gas prices even further, and fuel concerns about energy rationing in Europe as winter draws near.
As a result, the benchmark for northwest Europe, the front-month Dutch TTF contract, rose as high as 31% before somewhat retracing to trade at 265 euros per megawatt-hour. The increase from Friday's close is 23.5%.
As investors wait for Sentix Investor Confidence and Retail Sales statistics from the euro area and keep an eye on news about the energy crisis, the cautious market environment helps the dollar outperform its competitors. Due to the Labor Day vacation, the US market will be closed, and the trading activity may stay tepid in the afternoon.
Meanwhile, the Caixin Services PMI fell from 55.5 in July to 55 in August, according to statistics from China.