প্রকাশ: 13/07/2022
The US dollar’s role as the go-to currency for investors
worried about the economic outlook has been boosted in recent weeks, with the
US currency roaring to two-decade highs against multiple currencies.
The euro has been particularly vulnerable given the effect
of a continuing spike in natural gas prices on the regional economy and the
war in Ukraine. Meanwhile, the European Central Bank has been behind
rivals in raising interest rates.
Mizuho analysts said the move towards parity was happening
as “recession in the eurozone is priced in”, and said the backdrop suggested
little to improve risk sentiment.
SG Futures said this is a “catastrophe” for the European
Union as energy imports run the risk of becoming more pricey.
“Energy supply is already unaffordable and as we head into
winter it’ll likely get even worse,” it added on a tweet.
The biggest single pipeline carrying Russian gas to Germany,
the Nord Stream 1, began annual maintenance on Monday, with flows expected to
stop for 10 days.
With tensions between Europe and Russia at their highest in
decades over the war in Ukraine, officials are concerned that gas supplies may
not be resumed on July 21 once the scheduled maintenance work is complete –
exacerbating Europe’s energy supply crunch and potentially speeding a
recession.
Euro weakness has been a big part of the dollar index’s push
higher, with the safe-haven US currency also supported by worries about growth
elsewhere, as China, in particular, implements strict zero-COVID policies to
contain fresh outbreaks.
But arguably the biggest factor in the dollar’s rise is the
view the Federal Reserve will hike rates faster and further than peers.
The focus for this week will be macro data including US
consumer inflation on Wednesday, and comments from Federal Reserve officials as
investors look for clues on the outcome of its upcoming policy meeting before
the pre-meet blackout period, when trading activity is curtailed.
A high inflation reading would add pressure for the Fed to
step up its already aggressive pace of interest rate increases.
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