Home Daily Commentaries EUR lower over energy concerns

EUR lower over energy concerns

Monday 5 September, 2022

Daily Currency Update

Employment data on Friday showed mixed results. US non-farm employment change beat forecast for a 5th straight month, but average hourly earnings fell 0.1%, and the unemployment rate gained 0.2% against forecast. This has been seen as an issue for the US Federal Reserve as it now calculates that there are 2 jobs for every unemployed American, forcing employers to raise wages to attract suitable candidates. Although great for the average American amid rising costs, it does little to help cool the economy. Little is expected to change the path of interest rate hikes in the US, with the benchmark rate expected to be above 4% with no cuts till 2023. GBP/USD opens today just below 1.1500, having dropped under 1.1450 overnight. EUR/USD has dropped back below parity after touching a session high of 1.0030 on Friday. Overnight lows for the currency pair saw 0.9885. There is little in the way of macroeconomic data this Monday. It’s a bank holiday in the US and Canada as they both observe Labor Day. Low economic impact data from Europe has already been released – Services PMI. At 12:30 in the UK the new prime minister will be announced. It is widely expected that Liz Truss will beat Rishi Sunak and will get to work on delivering 30B GBP in tax cuts through an emergency budget later this month. She has also promised to have a plan to deal with the U.K’s energy bills “within one week.” It is uncertain what affect the news will have on the pound today, so could be worth monitoring the news.

Key Movers

The euro remains under pressure due to the economic risks facing the region, including potential energy shortages, slowing growth, and soaring inflation. Russia announced over the weekend that the Nord Stream pipeline would remain shut indefinitely, which scrapped the Saturday deadline for gas flows to resume. The move will likely push energy prices higher, further adding to the inflationary woes within the Eurozone, which fast approaches double digits. The European Central Bank is set to respond on Thursday with a second interest-rate hike before economic conditions deteriorate further. EUR/USD continues to trade under parity, touching fresh lows overnight of 0.9885. GBP/EUR is a little higher at around 1.1590 after trading in the low 1.15’s at the end of last week.

Expected Ranges

  • GBP/USD: 1.1450 - 1.1560 ▼
  • GBP/EUR: 1.1525 - 1.1660 ▲
  • GBP/AUD: 1.6850 - 1.7030 ▼
  • EUR/USD: 0.9870 - 0.9950 ▼