Dollar Soars as Euro Falls Below 0.99; Worry of Energy Shortages Weigh

FX Signals – The U.S. dollar rose to a new two-decade high in early European trade Friday, while the euro slumped to its lowest level since 2002 after Russia halted the supply of gas to Europe, raising fears of energy shortages as winter approaches.

Forex Signals

The dollar has been in demand of late on expectations that the Federal Reserve will continue with its aggressive monetary tightening, especially after the release of the better-than-expected nonfarm payrolls data on Friday.

FX Signals

Russia’s energy giant Gazprom announced its plans to shut down the Nord Stream pipeline to Germany immediately after the close of trading in natural gas in Europe on Friday, and hours after G-7 finance ministers had agreed on the need to impose a price cap on Russian oil exports.

The European Central Bank meets later this week, and is widely expected to raise interest rates given inflation is rapidly approaching double digits in the Eurozone and the policymakers have become worried about high prices becoming firmly entrenched.

FX Signals

That said, a large hike appears to be largely priced into the euro, and it’s debatable how much further the central bank can go with its tightening policy if an energy crisis severely disrupts economic growth in the region.Technical Summary

Elsewhere, USD/CNY rose 0.5% to 6.9355 to its weakest level in more than two years despite Caixin data showing earlier Monday that the country’s services sector grew more than expected in August.

The sector’s pace of growth slowed slightly from July, and followed on from data showing China’s manufacturing sector shrank in August, amid increasing pressure from COVID-19 lockdowns and an energy shortage.

USD/JPY rose 0.2% to 140.45, remaining above the key 140 area, after data showed that Japan’s services sector shrank for a second straight month in August. FxPremiereGroup

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Dollar Soars as Euro Falls Below 0.99; Worry of Energy Shortages Weigh