The euro fell beneath 99 cents for the primary time in practically twenty years after Russia shut down a significant fuel provide pipeline to Europe indefinitely, worsening an vitality disaster that threatens to tip the continent right into a recession.
The euro traded at round $0.99 versus the greenback on Monday morning within the U.S., down roughly 13% from the beginning of the yr.
Russia deserted a Saturday deadline to renew provide of pure fuel to Germany via a key pipeline — the Nord Stream 1 — after shutting it down earlier this summer season for annual upkeep. The choice from Russian vitality provider Gazprom got here hours after the Group of Seven nations agreed on a plan to impose a worth cap on Russian oil.
Gazprom didn’t say when it’d resume exports. Russia is the world’s second-largest producer of each oil and pure fuel, and the Nord Stream 1 pipeline accounted for about 35% of Europe’s whole Russian fuel imports final yr.
EURO, DOLLAR A PENNY AWAY FROM PARITY FOR FIRST TIME IN 20 YEARS
“Till the problems on the operation of the tools are resolved, fuel provides to the Nord Stream fuel pipeline have been fully stopped,” Gazprom stated in a press release.
Europe is now scrambling to retailer as a lot fuel as attainable earlier than winter, and can also be looking for various provides.
The decline within the euro comes forward of a gathering of the European Central Financial institution on Thursday, when policymakers are anticipated to boost its benchmark deposit price by at the very least 50 foundation factors to fight record-high inflation.
Danger aversion amid rising fears a few international recession has despatched traders fleeing towards the U.S. greenback as a protected haven of types because the Federal Reserve strikes to hike rates of interest on the quickest tempo since 1994 to curb white-hot inflation. Fed policymakers already authorized back-to-back 75 foundation level hikes in June and July, and have signaled that one other improve of that magnitude is on the desk in September.
The greenback index, which measures the buck in opposition to six main currencies, rallied to a recent 20-year excessive because the euro — in addition to the British pound — declined amid fears of an vitality scarcity and a success to development.
The U.S. central financial institution is elevating charges way more aggressively than the European Central Financial institution, which has additionally helped to spice up the greenback. And whereas there are recession fears brewing within the U.S., specialists consider the chances of an financial downturn in Europe are even greater.
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The sturdy U.S. greenback is nice information for People touring to Europe this summer season, who can anticipate to pay much less for a plethora of products whereas they’re abroad.