Euro slides below 1.03
The euro enjoyed a quiet Monday, as the currency markets were calm with US markets closed for a holiday. The euro started the Tuesday session without incident, but the roof fell in late in the Asian session. EUR/USD has declined a massive 1.74% on the day, touching a low of 1.0238, its lowest level since December 2002. The safe-haven dollar has been the big winner as risk sentiment has fallen. The dollar index has jumped 1.29% to 106.49, its highest level in 20 years.
The euro’s sharp downturn was not expected, but at the same time should not come as a huge surprise. The euro has been falling for months since starting the year above the 1.13 line. The war in Ukraine, which has raged for over three months in the eurozone’s backyard, has dealt the euro a crushing blow, with parity becoming a very real possibility. Eurozone growth has been lukewarm and the sanctions against Russia and countermoves by Moscow have put the bloc’s energy supplies in jeopardy. Russia hasn’t hesitated to weaponize energy exports and is scheduled to provide maintenance to the Nord Stream 1 pipeline next week. If the Russians decide to play political hardball and keep the pipeline closed, the eurozone will face a massive disruption of gas supplies.
This grim situation has been going on for months, and investors may have seized on some negative developments on Tuesday to give a thumbs-down to the euro. The S&P Global Final Composite PMI fell to 52.0 in June, down from 54.8 in May. This points to a slowdown in business activity, on top of a decline in manufacturing and weaker activity in the services sector. Inflation continues to accelerate, which has hurt consumer spending. As well, Norwegian oil workers went on strike today, which will affect oil and gas output and has raised concerns about an energy shortage in Europe.
- EUR/USD is putting pressure on support at 1.0221. Below, there is support at 1.0075
- There is resistance at 1.0324 and 1.0470
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