Gas shut sends Euro tumbling

The Euro tumbled to a new 20 year low against the US dollar in today’s trading session even though markets in the US were closed for the memorial holiday while the DXY dollar index appreciated to a level not seen since 2001.

The move was driven by broad-based weakness in other currencies, with particularly notable moves against British pound which hit a new record low against the dollar and the Euro which traded below 0.99 to the dollar

The major driver of dollar strength on Monday was yet another disruption to the European gas market as Russia announced an indefinite extension to the shutdown of the Nord Stream pipeline. Gas prices opened the European trading session 25% higher than they did on Friday before pulling back towards the end of the day.

With Russia using gas supplies as a weapon in reaction to the West restricting its access to the international payments system and formulating energy price caps, a highly damaging total shutdown of gas supplies in the months ahead has become a real possibility and some say even a foregone conclusion.

This is coming at a time when Europe has yet to put together a back up plan to minimize the damage of sky-high energy prices to residences and businesses although some countries in the EU have let their intentions known they plan to find alternative supplies.

Looking further ahead today, the main drivers of the EUR/USD currency pair will be the release of the latest factory orders from Germany which is a key indicator of business confidence and should show if an economic recovery in Europe’s largest economy is currently underway.

In the American session market participant will await the release of the ISM services PMI figures from the US which is also a key indicator of business confidence and will play a factor on the size of the interest rate hike expected from the US Federal Reserve later this month.