Euro teeters on the brink of parity with the U.S. dollar on recession fears

A financial trader monitors data on computer screens as a desktop television shows euro currency banknotes at the Frankfurt Stock Exchange in Frankfurt, Germany.

Martin Leissl | Bloomberg | Getty Images

The euro hovered close to parity with the U.S. dollar on Tuesday, as the euro zone’s energy supply crisis and economic woes continue to depress the common currency.

The euro was trading 0.2% lower at around $1.002 during morning deals in London, paring earlier losses that pushed the single currency to the brink of parity with the dollar.

Fears of a recession have grown in recent weeks due to rising uncertainty over the bloc’s energy supply, with Russia threatening to further reduce gas flows to Germany and the broader continent.

Russia temporarily suspended gas deliveries via the Nord Stream 1 pipeline on Monday for annual summer maintenance works. The pipeline is Europe’s single biggest piece of gas import infrastructure, carrying around 55 billion cubic meters of gas per year from Russia to Germany via the Baltic Sea.

The scheduled 10-day suspension of gas flows has stoked fears of a permanent cut to supplies, potentially derailing the region’s winter supply preparations and exacerbating a gas crisis.

“It is a key and obvious psychological level which is very much under threat here,” Jeremy Stretch, head of G-10 FX strategy at CIBC Capital Market, told CNBC’s “Street Signs Europe” on Tuesday.

Stretch said the prospect of the euro falling below this level was a reflection of burgeoning recession fears across the euro zone.

ECB in a ‘very, very difficult position’

Graham Secker, chief European equity strategist at Morgan Stanley, said the weakness of the euro could provide a boost for European companies ahead of the forthcoming second-quarter earnings season.

“Twelve months ago, the euro was above $1.20 and now we are obviously very close to parity so there is a pretty significant tailwind to earnings currently, but I view that as a positive offset against some of the other negative factors that are brewing,” Secker told CNBC’s “Street Signs Europe.”

“Right now, our expectation is that the second-quarter earnings season probably will end up with a net beat,” he added.

Source link

Denial of responsibility! planetcirculate is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.