Morning Brief – The day for parity?

The day for parity?

 

Could today be the day that EURUSD hits parity? We’ve covered recently the likely scenarios that will arise and could also cause a move to 1-1 or lower reading of Euro-Dollar. However, with the world’s most traded currency pair still a couple of cents clear of the psychological level at the time, the potential timing of such a move was somewhat more vague. With markets stabilising only a whisker short of this level overnight, the realisation of parity could now be drawing into view.

 

Following a punishing day for the Euro and relatively strong day for risk-off assets including the US Dollar yesterday, markets have opened with a realistic prospect of passing the 1-1 threshold. The catalyst for the move yesterday was yet more concerns over the provision of European energy and the potential economic impacts that would bring to the Euro area. The routine shutdown of Nord Stream 1, the major pipeline and delivery method for Russian energy exports to Europe, is threatening to turn into something more. Discourse surrounding the provision of energy from Russia continues to be tense due to the ongoing geopolitical turmoil created by the war in Ukraine.

 

Concerns that once the pipeline is shut down for a week for maintenance it will not be resumed for some time as a deliberate retaliatory move for the sanctions imposed on Russia are creating destructive trading dynamics across all markets, not least EURUSD and the wider FX market. These energy concerns as well as further central bank speakers and price level readings today could deliver the volatility that the market would require to break this psychological level.

 

 

 

Discussion and Analysis by Charles Porter

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