Euro hits lowest level in 20 years as economic outlook darkens

The euro fell to a 20-year low on Tuesday and shares and oil prices fell sharply as concerns over the health of the global economy intensified.

As a sign of worsening sentiment about the growth forecast, Europe’s single currency lost almost 1.8% against the dollar to $ 1.0235 – its weak point since 2002.

Vasileios Gkionakis, head of European FX strategy at Citi, said the euro-dollar equation “seems almost inevitable now”, noting that the decline in the euro was due to the prospect of further declines in European stocks and a sharp rise in natural gas prices. .

Europe’s regional Stoxx 600 stock fell 2.1% on Tuesday. The London FTSE 100 closed down 2.9%.

The Wall Street S&P 500 was down 1.5% until late in the morning in New York, while the Nasdaq Composite was down 0.3%, down less than other indices, with large tech companies – known for making consistent profits during times of market pressure Record increases. Amazon and Facebook’s owners’ headquarters each added about 2 percent.

However, in addition to the feeling of gloom, TTF-related futures, the European wholesale gas price, rose by almost 9% to a four-month high when it became clear that Norway’s Equinor was temporarily closing three oil and gas fields after workers went on strike. . Norway has warned that gas exports to the UK could shut down this weekend if the situation escalates.

TTF later cut its profits to be traded regularly.

Jane Foley, head of FX strategy at Rabobank, said the euro’s downturn was mainly due to rising fuel prices in Europe. “The strikes in Norway are definitely not helping and I think most of these risks make it increasingly difficult to be optimistic,” she said.

“The dollar remains this primary safe haven… And it makes it worse [euro] movement. “People want dollars in times of stress and anxiety,” she added.

Elsewhere in energy markets, Brent crude fell nearly 10 percent to $ 102.41 a barrel, reflecting concerns about a possible recession and impact on oil demand. The West Texas Intermediate, the U.S. index, fell below $ 100 a barrel for the first time since May.

Roger Lee, head of UK equity strategy at Investec, said the sale following the rise in gas prices, which included big falls in cyclical sectors such as materials and energy, was a sign that “the market is fully convinced, if there was such a doubt, that we are heading for recession”.

German government debt rose on Tuesday as the 10-year yield on the bond – which is considered a means of raising costs across the eurozone – fell by 0.16 percentage points to 1.18%. The two-year yield fell 0.19 percentage points to 0.44%.

Elsewhere, the 10-year yield on the U.S. Treasury bill lost 0.12 percentage points to 2.78%. Bond yields fall as their prices rise.

Yields on bonds and bonds rose earlier this year, with the European Central Bank and the US Federal Reserve signaling aggressive interest rate hikes and a planned withdrawal of large bond purchase plans in order to cope with hot inflation.

The Fed raised its interest rate by 0.75 percentage points in June, the largest increase since 1994.

But investors have in recent weeks lowered their expectations about how high the influential central bank in the world will raise funding costs in the coming months, amid growing evidence of an economic slowdown.

Futures markets indicate that the Fed is now expected to raise interest rates to 3.3% in early 2023, down from three weeks ago forecasts of 3.9%.

The details of the Fed’s latest monetary policy meeting, due out on Wednesday, may give further hints as to the extent to which the central bank is prepared to tighten monetary policy. A closely-watched U.S. jobs report on Friday also signals the heat level in the country’s labor market, a criterion that could also affect the Fed’s decision-making.

Another report by Nikou Asgari

Euro hits lowest level in 20 years as economic outlook darkens Source link Euro hits lowest level in 20 years as economic outlook darkens

Related Articles

Back to top button