Euro on the verge of breaking, shares fall again
The euro fell within a tizzy of parity with the dollar on Tuesday and stock markets fell on the prospect of more central bank tightening and concerns from unruly investors around the world about the health of economies.
The dollar’s role as a safe-haven go-currency for investors worried about the economic outlook has burned through in recent weeks, with the U.S. hitting two-decade highs against many currencies.
The euro has been particularly weak, with the European Central Bank lagging behind rivals in the ongoing boom in natural gas prices and war in neighboring Ukraine and raising interest rates on the regional economy.
As of 0725 GMT, the euro was down 0.3 percent to a low of $1,0004, its weakest in more than 20 years.
The dollar index rose 0.3 percent to 108.48, while sterling hit a two-year low and the yen was not far from its weakest level in more than two decades.
Analysts at Mizuho said the move towards parity was occurring as “bearish prices in the euro area”, adding that the background suggested little to improve risk sentiment.
“Either way, there seems to be little to stop the euro/dollar breaking parity in the relatively near term,” he wrote.
The focus for this week will be macro data, including US consumer inflation on Wednesday, and comments from Federal Reserve officials, as investors look for clues on the outcome of the Fed’s upcoming policy meeting ahead of the pre-meet blackout period.
A higher inflation reading will put pressure for the Fed to increase its already aggressive pace of raising interest rates.
In equity markets, the euro STOXX fell 0.7 per cent, while the German DAX fell 0.8 per cent and the UK FTSE 100 0.44 per cent.
US futures markets also pointed to a weak opening.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.3 per cent to its lowest level in two years, while Japan’s Nikkei fell 1.8 per cent.
Also high on the list of investors’ worries is the fact that a growing number of Chinese cities, including commercial hub Shanghai, are adopting new infections from this week to rein in new infections.
Rising energy costs in Europe are also a major fear as the largest single pipeline carrying Russian natural gas to Germany entered annual maintenance, with flows expected to halt for 10 days.
Investors are concerned that the war in Ukraine could extend shutdowns, further restrict European gas supplies and propel the struggling euro area economy into recession.
The yield on benchmark 10-year Treasury notes stood at 2.92 per cent, falling below 3 per cent overnight as investors bought safe-haven Treasuries amid a sell-off on Wall Street.
Despite concerns about tight supplies, growth fears were affecting oil as well.
Brent crude futures fell 2.2 per cent to $104.73 a barrel, while US West Texas Intermediate crude was down 2.44 per cent at $101.53 a barrel.
Gold remained stable, the spot price was trading at $ 1,735 an ounce. Cryptocurrency prices fell, with bitcoin falling 1.4 percent to $19,670.