The euro hit a 20-year low on Monday, plummeting below $0.99 as natural gas prices soar to new highs. This comes after Russia halted gas supplies via its main pipeline to Europe, the Nord Stream pipeline.
While the Nord Stream was already operating at a low capacity prior to the stoppage, Russia delayed the planned resumption of services on Saturday after detecting what it identified as an oil leak in a turbine. This comes at a precarious time for European nations looking to build up the gas supply they require for the winter months ahead. Currently, members of the European Union are scrambling to find alternative sources of natural gas in the face of the EU ban on the import of Russian goods.
During early European trade on Monday, the euro fell to $0.9876; the lowest rate since 2002. Michael Cahill, a strategist at Goldman Sachs, stated that his firm expects the euro to fall further below $0.97, explaining, “Gas flows have been curtailed even more than expected and we have already seen evidence of demand destruction weighing on activity.”
Other currencies that are also closely correlated with energy prices suffered major losses as well, with the sterling falling by 0.5% to a new 2-1/2 year low of $1.1444.