Winter is coming for the EUR.

EUR/USD pair will open the room for a move down to as low as 0.9000.

Key Quotes:

“Europe has lately been the epicentre of a perfect storm in energy markets. The energy price shock has and will continue to impact the industrial sector, leading to a negative terms-of-trade shock for the Euro Zone. Goods that were previously produced in Europe will now have to be imported from countries elsewhere where energy prices have not risen as much as in Europe. Worsening terms of trade argue for a weaker Euro ahead.”

“It is extremely difficult for Europe and Germany in particular to diversify its gas supply quickly in the short-term. More LNG will come, but it will be costlier than the Russian gas Germany has been accustomed to and it will take time before the infrastructure is in place for significant volumes. More rainfall ahead will help European hydropower production – we need the weather gods to be benevolent with Europe with a wetter and warmer winter. Moreover, France needs to get its atomic power reactors back on track, this will also take time but should be resolved during next year. Some of the factors behind the energy crises should improve in the coming period, but the winter heating season is nearly upon Europe and the risks for energy rationing are hanging over Europe’s head.”

“Political fragmentation in Europe has increased with far-from-the-centre political parties winning elections – look at Italy and Sweden. The Euro is a political project and if EU’s politicians suddenly don’t get along, then we could see the Euro’s existence brought into question – similar to the case during the 2010 Euro crisis.”

EUR/USD falls toward 0.9600 amid renewed dollar strength

EUR/USD has turned south and declined toward 0.9600 in the second half of the day on Monday. A sharp decline witnessed in the GBP/USD pair and the souring market mood provided a boost to the dollar, lifting the US Dollar Index back above 114.00. 


GBP/USD falls below 1.0700 following BoE statement

GBP/USD came under renewed bearish pressure and slumped below 1.0700 during the American trading hours. In a statement published on Monday, the Bank of England said that they welcome the government’s commitment to sustainable economic growth, triggering another GBP selloff.


Gold breaks below $1,640 as US yields surge higher

Following the earlier recovery attempt to the $1,650 area, gold lost its traction and declined below $1,640. The benchmark 10-year US Treasury bond yield is up nearly 3% on the day at around 3.8%, forcing XAU/USD to stay on the backfoot and stretch lower.

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