(New York) The euro briefly touched exact parity with the dollar on Tuesday, undermined by the specter of a prolonged disruption in Russian gas supplies to the European Union.
Updated yesterday at 4:18pm.
But investors appeared hesitant to cross this symbolic milestone and the euro stabilized at $1.0035 against the greenback around 20:00 GMT, almost unchanged (-0.04%).
“It’s obviously a very important threshold, technically and psychologically,” underscored TD Securities’ Mazen Issa, to justify the small rebound that followed the transition to equilibrium, a first since December 2002, when questions about the young currency weighed on its course .
The analyst expects the single currency to benefit from technical resistance associated with futures contracts and other hedging instruments in the near term. “But it’s just a reprieve,” he said before the euro slipped back below a dollar.
The market is concerned about a major energy crisis in the old continent and doubts about Russia’s restoration of gas flows after a halt for maintenance work on the Nord Stream 1 gas pipeline. This situation is increasing recession fears in Europe.
Energy from Russia “is at the heart of the turmoil in Europe,” and Canada’s announcement on Saturday that it would return turbines for the Nord Stream gas pipeline to Germany in a bid to defuse the energy crisis with Russia “is without positive implications,” comments Jeffrey Halley, analyst at Oanda.
On Monday, Russian energy giant Gazprom began ten-day maintenance work on the Nord Stream 1 gas pipeline. Germany and other European countries are waiting to see if gas supplies will resume.
“The key question is whether the gas will come back after July 21. The markets already seem to have made up their minds,” Halley notes.
For Mark Haefele, an analyst at UBS, a halt to Russian gas supplies to Europe would “cause a recession across the eurozone with three consecutive quarters of economic contraction.”
The European Central Bank (ECB) will therefore find it difficult to tighten monetary policy to fight runaway inflation without worsening the economy.
The US Federal Reserve (Fed) has more leeway to continue raising interest rates as payrolls data released on Friday showed the US economy is holding up better so far.
Safe havens sought
On Wednesday, inflation data from France, Germany and the United States could fuel investor concerns about divergence between economies on either side of the Atlantic.
“If US inflation is stronger than the market expects, it could benefit the dollar,” said Forex.com analyst Fawad Razaqzada, investors are betting the Fed will have to act even faster to hike rates.
“Investors are struggling to break the symbolic parity threshold” and take the euro below that level, said Walid Koudmani, an analyst at XTB.
“This slow pace proves that this is a long-term move of selling the euro and buying the dollar and not market manipulation,” adds Mr. Razaqzada.
The euro is also struggling against the Swiss franc, also a safe haven, falling to 0.9836 Swiss francs, its lowest level since 2015.
The dollar also shines against other currencies seen as risk-prone: the pound sterling plummeted to $1.1807, its lowest since March 2020, when the COVID-19 pandemic began in Europe, amid full Brexit negotiations British currency pushed back on course to its lowest level since 1985.