Morning bid: watch the euro, it is moving towards parity

Euro coins fall into the water in this image, taken May 23, 2022. REUTERS/Dado Ruvic/Illustration

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A look at the day ahead at the markets of Dhara Ranasinghe.

The largest single pipeline carrying Russian gas to Germany will begin annual maintenance on Monday, and flows are expected to stop for ten days. Markets fear the shutdown could be extended due to the war in Ukraine, raising the recession risk for Europe.

Any extension of the shutdown would make it impossible to fill EU gas storage to required levels before winter, meaning gas and electricity rationing could begin soon, analysts say.

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Energy-saving measures have already started in Europe’s powerhouse economy Germany. Investors are now looking for more details on how policymakers plan to deal with potential energy shortages during the peak winter months.

And all of this isn’t a great backdrop for the euro, which lurched towards parity with the dollar on Friday. As early European trade picks up, the single currency is down about 0.45% to $1,0140.

For many, it’s now a matter of when not if the euro dips below $1, something that last happened 20 years ago.

Meanwhile, the dollar’s broad strength was evident in developed and emerging markets, with the Indian rupee weakening to a record low.

Global stock markets are also weaker, with turmoil ahead of Wednesday’s US inflation data that could lead to another super-large rate hike by the Federal Reserve.

Both European stocks and Wall Street stocks are expected to open lower, judging by stock futures trading.

And in Asia, Macau closed all its casinos for the first time in more than two years, sending shares in gambling companies tumbling as authorities struggle to contain the worst outbreak of coronavirus yet in the world’s largest gambling hub. read more

Key developments that should give markets more direction

on Monday:

– Twitter hires US law firm Wachtell to sue Musk after he pulls out of $44 billion deal – sources read more

– Japanese Prime Minister Kishida plans to consolidate ruling party power as Abe grieved Read more

– Machine orders in Japan fall for the first time in 3 months read more

– New York President John Williams speaks

– US three-year bill auction

– US win: Pepsico Q2

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Reporting by Dhara Ranasinghe; Edited by John Stonestreet

Our Standards: The Thomson Reuters Trust Principles.

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