Urgent: A sharp fall in European stocks… The series of Euro defeats will not stop despite the gains By Investing.com


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Investing.com – The US currency pair continued to rally, weighed down by last week’s events, as investors reacted to comments from the Jackson Hole seminar. Jerome Powell reiterated in his speech that there will be some pain for both investors and consumers as he continues to fight rising inflation by raising interest rates.

The euro rose today, a basket of currencies, especially after the European Central Bank members confirmed the statements of the President of the US Federal Reserve, and that the continuation of the steps to raise interest rates is a necessary measure even if economic stagnation occurs, because eliminating high inflation is the highest priority now.

weak euro

In contrast to the euro’s gains today against other currencies, investors are betting that the value of the euro will fall to its highest level since the pandemic hit Europe nearly two years ago, with the growing risk that record energy prices will drag the region into recession.

The increased bets against the euro reflect the bullish trend of the US dollar, which was reinforced by signals from the US Federal Reserve, Chairman Jay Powell, on Friday, that it will continue to raise interest rates to tackle high inflation even in the event of a slowdown.

In addition to the risk of recession, Europe is also facing a sharp rise in prices. At the annual meeting of central bankers in Jackson Hole, European Central Bank Executive Board member Isabel Schnabel and French central bank governor Francois Villeroy de Gallo warned that monetary policy must They remain strict for a long time in Europe.

The euro has already fallen 15%, tumbling below value last year, and reached a 20-year low last week as wholesale prices for gas and electricity soared to all-time highs in Europe amid fears that Russia is tightening critical energy supplies.

energy shock

“The euro at the moment is a reflection of the European energy shock, and the biggest driver for the next two weeks includes what will happen with the Nord Stream 1 pipeline from Russia and higher gas prices,” said Mark McCormick, global head of FX strategy at TD Securities.

He said TD entered a short euro position when it was trading at $103.45, and took a profit after the euro had recently fallen to parity against the dollar.

Rising prices prompted investors to reassess how long inflation could remain high and how severely it would affect the eurozone economy, as sectors from fertilizer production to the glass industry warn that rising gas prices are constraining production.

The increased bets against the euro also reflect the dollar’s role as a “safe harbor in the storm” as well as the fact that the US is not exposed to the gas crisis, said David Adams, head of G10 foreign exchange strategy at Morgan Stanley (NYSE:).

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The future of the euro

The EUR/USD pair declined clearly during the last period, settling below the level of parity with the US dollar, and in this context, economists at Nordea Bank expected that the pair would continue to decline until the end of this year.

Experts at the bank indicated that the euro-dollar pair is expected to continue and target the level of 0.97 by the end of the year, coinciding with the increasing possibilities of a recession in the euro area, especially the German economy, in the coming winter.

Earlier, ECB Deputy Governor Luis de Guindos said during an interview with local media that the depreciation of the euro has several negative repercussions, but the most prominent one is that it is one of the factors behind the rise in inflation.

euro now

The single European currency ranked first in terms of strong profits, which amounted to about 4.12% against other major currencies, with the start of the American session transactions in the forex market session today.

However, the EUR/USD pair rose in these moments to record 1.0005, up by 0.45%.

Markets now

European shares fell at the start of the week’s trading, after Federal Reserve Chairman Jerome Powell indicated that high interest rates may continue to counter high inflation.

As reported by CNBC, ECB Governing Council member Isabel Schnabel stressed over the weekend that central banks must act decisively to tackle rising inflation, even if it means pushing their economies into recession.

The European “Stoxx 600” index fell 0.72% or (-3 points) to 423 points, the German “Dax” index fell 0.80% to 12868 points, and the French “CAC” fell 1.01% to 6209 points.

Trading on the British “FTSE 100” index is suspended today due to an official holiday in the country.

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