The FOREX-euro maintained its position above parity with the dollar on Monday as the largest pipeline supplying Russian gas to Germany commenced its yearly maintenance period, with flows anticipated to cease for ten days.
Investors are concerned that the conflict in Ukraine may cause the shutdown to last longer, severely limiting the supply of gas to Europe and sending the already fragile eurozone economy into recession. The majority of the major factors that have contributed to the pair's recent weakness, including risk sentiment and Fed-ECB divergence, don't appear to be getting better anytime soon, according, and the euro should continue to be quite unattractive, ING strategists said in a note.
After the release of larger-than-expected U.S. payroll data for June, the euro dropped to the verge of parity at $1.0072 on Friday before surging higher. Due to the significant gains made by the dollar on Monday, the single currency was trading lower by 0.8 percent at $1.0107 per dollar as risk aversion gripped investors.
On Monday, the dollar rose to a 24-year high against the yen as strong election results for Japan's ruling conservative alliance suggested that loose monetary policies would not alter. In early trading, it rose to 137.28 yen, the highest level since late 1998. It subsequently somewhat reduced those gains and was recently up at 136.93, up 0.6 percent.
The Federal Reserve is expected to raise interest rates aggressively, which will support betting on another hot print of U.S. inflation statistics for June and strengthen the currency. In comparison to the 8.6 percent recorded in June, a Reuters poll predicts an 8.8 percent figure, a new 40-year high. The second-quarter GDP figures for China are the other major economic event this week. Investors will be looking for clues as to how severely COVID-19 lockdowns affected the economy when they are released on Friday.
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