has reached parity with the U.S. Dollar for the first time in 20 years, but it
seems that the Euro could be on its way down as there are internal reasons why
the single European currency could decline while the Greenback could rise
further. The Dollar has been rising aggressively over the last couple of
months. The U.S. Dollar index (DXY) climbed from 95 points at the beginning of
2022 to 108 points, or 14%, recently.
is strengthening as the Federal Reserve (Fed) continues to tighten monetary
policy by drastically raising interest rates to combat record inflation.
has lost 10% against the U.S. Dollar since the beginning of 2022 and is now
close to being on an equal path to the Greenback. This week the single European
currency fell dramatically to the 1.01 level, a level, which was lastly seen20
a weaker Euro is considered to be an advantage for the export oriented European
economy, and in this kind of a situation the European Central Bank (ECB) normally
advocates for the single currency to decline. However, recent realities make
this issue more complicated.
market in Europe was on alarm recently as prices for July 2022 Dutch TTF gas
futures jumped to 133 Euros per MW last Friday. Prices scaled back to 129 Euros
on Tuesday, but they are unlikely to reach a deeper correction.
surged as Russia significantly reduced gas supplies to Europe during the period
when gas was being replenished into gas storages in preparation for the coming winter
season. Storages are reported to be filled by 59% of their total capacity,
which is a low percentage for this time of the year.
Europe is beginning
to suffer from the physical shortage of gas. There are many reasons for this
that supplement each other. The Freeport LNG Quintana Island liquefaction facility is currently shut down after a gas
blast and will not continue its full operation until late 2022. This facility
exports around 20% of LNG from the United States that primarily goes to Europe.
Gas exports via the North Stream pipeline to Germany have been dramatically
cut by 100 million cubic meters per day or 60% of the regular supply.
Lead is a
toxic metal for humans by its nature. And it seems that now it is also toxic
for investments as its price dropped by 3% on the London Metal Exchange this
Monday, from $2150 to $2087 per tonne.
It is a
production metal that is sensitive to economic growth perspectives and, as
such, its price significantly dropped at
the beginning of the week after the United States was hit by a huge
inflationary shock. Consumer prices rose unexpectedly by 8.6% year-on-year in
May after posting 8.3% in April.
beginning of May the U.S. Dollar vs the Turkish Lira chart could be compared to
a space rocket, shooting off into the sky. This week the Greenback is up from 16.26 to
17.20 Turkish Lira, or by 3% over three days. This amounts to 600% of annual
yield. It seems that after a slow start, the “rocket” went shot far out into
Lira is primary suffering from the Turkish Central Bank’s unusual monetary
policy directed by the President of Turkey Recep Erdogan.
Dutch TTF July
22 gas futures soared above 93 Euros per 1 MWh, an important psychological
resistance level, and hit 95 Euros on Tuesday morning. This may indicate that
prices may surge further.
surged after European leaders agreed in principle to cut about 90% of oil
imports from Russia by the end of 2022 raising Brent crude prices above $120
per barrel. Gas is an alternate fuel and its prices followed oil quotes.
two major abilities. One is that it is traditionally considered to be a safe
haven asset that is in high demand during times of elevated risks in the
market, rising inflation, and geopolitical uncertainties. The second is that it
acts as an anti-dollar indication because gold prices mostly move in the
opposite direction to the Dollar. The Dollar itself has become a safe haven
asset in recent months as the Federal Reserve (Fed) has risen interest rates along
with Treasuries yields. So, gold prices are now more correlated with the
irrational market life sometimes breaks traditional molds. Countries with
positive trade balance were seeking for a weaker national currency to benefit
their exports. Weak Euro, Swiss Franc, British Pound and similar currencies are
dependent on their exports. Thus, weaker nation currency support exports and
increase budget revenues. Thus, a giveaway game continued for decades. Whoever
has a weaker currency seems to be the champion.
pandemic and Russian warfare in Ukraine became a game changing environment in
Pound suffered over the last month when it plunged 7% from 1.3112 below the
1.2200 level. However, the Greenback is responsible for most of this dive. It has
been heavily rising across the market since the Federal Reserve (Fed) began to
tighten its monetary policy and increasing interest rates. Geopolitical, inflationary, and stagflation risks usually draw
investors towards the safe haven U.S. Dollar.
Dollar index (DXY) that measures the currency basket of the Dollar against six
major currencies, rose from 99.8 points to 104.