EUR/USD Makes New 20-Year Lows

09/28/2022

1 minute read

2022.09.28 16:45

MarketPulse

The euro is in negative territory today after posting six straight days of losses. is trading at 0.9553 in Europe, down 0.41%.

Referendums, Nord Stream Explosions Weigh On Euro

September can’t end fast enough for the euro, which has declined a massive 4.8% against the dollar. Earlier today, EUR/USD fell to 0.9536, its lowest level since June 2002. With the war in Ukraine escalating and Nord Stream reporting that its pipeline was deliberately damaged, it’s hard to be optimistic about the euro’s outlook.

The sham referendums in Russian-occupied Ukraine have ended; predictably, the vote to join Russia was close to 100%. Moscow is expected to declare on Friday that the territories are being annexed to the Russian Federation, sparking fears that Russia could resort to nuclear weapons to defend what it claims is Russian territory.

There was a further escalation in the Ukraine war last week, as explosions at the Nord Stream 1 and 2 pipelines were suspected to be sabotage. Nord Stream 2 has been shelved, Nord Stream 1 has been shut down for weeks, and any faint hopes that Russia might renew gas exports through Nord Stream have been dashed. European prices have jumped in response to the news.

The continues to rally, and Treasury yields pushed above 4.00% earlier today, for the first time since 2008. The markets are showing a healthy respect for Fed hawkishness, even after weakened in the past two inflation reports.

There is some optimism that the current rate-tightening cycle is ending, with Fed member Evans stating that it will be appropriate to slow the pace of tightening at some point. For now, the US dollar has momentum, driven by an aggressive Fed and weak risk appetite.