Europe’s energy crisis continues to weigh on the euro (EUR) causing it to fall to a 20-year low against the US dollar (USD).
Asian stocks fell for a sixth straight session on Monday (August 23) as soaring energy prices in Europe fueled recession fears and pushed bond yields higher. Shares of Japan’s Nikkei 225 fell 1.19% to 28,452.75 and Topix traded 1.06% lower to end the session at 1,971.44. South Korea’s Kospi fell 1.1% and the S&P/ASX 200 fell 1.21%.
Asian stocks fell for the sixth straight session. Source: CNBC
This was also the impact that caused the euro to drop to a two-decade low, to $0.9903.
— MarginATM (@marginatm) August 23, 2022
Benchmark gas prices in the European Union jumped 13% overnight to a record high. The move marks a doubling in just one month, 14 times higher than the average over the past decade.
Analysts at US bank Citi warned on August 22 that inflation in the UK could reach 18% if energy prices go unchecked. This is more than nine times the target set by the Bank of England. The last time consumer price inflation reached such a high level in the country was in 1976.
Some analysts say the “surge in energy prices” suggests that inflation has yet to peak. With a high risk that it will continue to increase rapidly for a while without Central Bank intervention.
Tapas Strickland, Chief Economist of NAB said:
“So it’s no surprise that the US dollar hit a multi-decade high against the euro and the pound is falling steadily.”
Current Euro (EUR) price. Source: Tradingview
The coin is struggling at $0.9921 and saw one more drop to US dollar parity on Monday. This figure marks a 20-year low for the euro as it was hit by a major energy crisis in Europe. Meanwhile, the US Federal Reserve is still making plans to raise interest rates to curb inflation.
The announcement of the closure for maintenance of the Nord Stream 1 gas pipeline, which supplies most of Russia’s gas to Europe from August 31 to September 2, has heightened concerns about shortages. and caused natural gas prices in Europe to skyrocket.
Meanwhile, U.S. stock futures were already partially higher than they were initially. Investor focus this week will be the Fed’s economic symposium in Jackson Hole, Wyoming. At this event, Chairman Jerome Powell will give a speech on Friday (August 26) and refer to the Central Bank’s approach to curbing inflation.
As reported by MarignATM (here), the Jackson Hole conference will be held from August 25-27. Fed Chairman Jerome Powell will deliver an important speech on the outlook for the US economy on August 26.
Not only in the US, this year’s Jackson Hole meeting comes at an important time for financial markets around the world. US inflation in July seems to have started to cool down. While in other countries (UK, Germany, ..), inflation is still a problem causing the authorities “headache”.
Back in Europe, investors looked to August’s PMI (buying managers index) for the euro. This shows that business activity fell for the second month in a row.