The common currency does not seem to have a very successful time behind it. Only since the beginning of the year to the US dollar, the euro could lose almost 7%, and today we can observe the lowest EUR/USD exchange rate since 2017.
The euro weakened to $1.065 and could be at its lowest level since April 2017. It seems that the Euro may be weakened by growth concerns and risks related to energy supplies from Russia. Russia has stopped the flow of gas to Poland and Bulgaria and said it will remain cut off until those countries agree to pay in rubles.
The latest data also showed that consumer sentiment in Europe's largest economy fell to a record low (the GfK consumer climate index in Germany fell to -26.5 by the end of April). Risk sentiment remains shaken by the war in Ukraine, rising inflation and policy tightening by central banks, which could translate into slowing global growth.
Money markets expect the Fed to raise interest rates by half a point at its next two meetings and the European Central Bank to raise rates by 25 basis points in July in an effort to tame inflation, which is currently hitting record levels in Europe and 40-year highs in the U.S. Meanwhile, incumbent French President Macron was re-elected with over 58% of the vote. His rival Marine Le Pen received over 41% of the vote, the highest share of the far-right in an election to date, which could also be a bit of a risk going forward for Europe.
Later in the day, the market may still be waiting for Christine Lagarde's speech from the European Central Bank, which could also have a potential impact on the Euro. A weakening Eurozone currency could have the effect of importing inflation, which could make it harder to fight rising prices, so the market may be wondering to what level the EUR can still lose before the ECB intervenes.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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