12/7/2022–|Last update: 12/7/202203:39 PM (Mecca)
The value of the single European currency (the euro) fell today, Tuesday, to one US dollar, at a level not recorded since a year when the euro was introduced into circulation 20 years ago, in light of the risks posed by the cut in Russian gas supplies to the European economy.
The value of the euro reached one dollar at about 09:50 GMT for a short period, in a precedent that has not occurred since December 2002, before rising again slightly.
The euro is affected by the possibility of interruption of Russian gas supplies to Europe. Investors avoid risky assets and prefer to trade in dollars, which rose today to par with the euro for the first time since 2002.
And concern hangs over the markets due to a major energy crisis in the old continent, as there are doubts about whether Russia will resume gas deliveries after it was suspended for maintenance work on two Nord Stream 1 gas pipelines. This situation increases fears of a recession in Europe.
Analyst Jeffrey Haley of ONDA believes that Russian energy resources are “at the center of the storm in Europe”, and Canada’s announcement last Saturday that it would return to Germany turbines dedicated to the Nord Stream gas pipeline to ease the energy crisis with Russia “was without a positive effect.”
On Monday, the Russian giant Gazprom began a 10-day maintenance period for the “Nord Stream 1” pipeline.
For its part, Germany and other European countries are waiting to see if Russia will resume gas deliveries after this period.
recession in the eurozone
“The key question is whether the gas will come after 21 July,” says Halley.
Mark Heffley, an analyst at UBS, warned that stopping Russian gas deliveries to Europe “will cause a recession in the whole of the eurozone, with an economic contraction for 3 consecutive quarters.”
On Sunday, French Economy Minister Bruno Le Maire called for “battle readiness” to deal with the possibility of an overall supply cut, saying it was the “most likely possibility”.
Stephen Innes, an analyst at SPI Asset Management, believes that the hypothesis of a total reduction in supply “will reinforce the already high stagflation in Europe.”
The rise in energy prices contributes to the increase in inflation while pushing towards a recession or even contraction in the Eurozone economy. The slow growth leaves little room for the ECB to raise interest rates.