Sterling gains as Euro suffers

… on surging European gas prices

Euro suffers

Recent reports of restricted Russian gas supplies to Europe are heaping fresh pain on the Euro.

As a result, the Eurozone’s single currency was amongst the biggest losers on the currency markets yesterday, July 26 after Russia said there are “some problems” with another Nord Stream turbine. The news confirms fears that Russia was ready to severely restrict gas flows to Europe in response to Europe’s support for Ukraine.

“The risk that Russia cuts off the gas completely and paralyses economic powerhouses like Germany during the winter is hanging like a sword over the euro,” says Marios Hadjikyriacos, Senior Investment Analyst at XM.com.

Concerning the outlook, “anything is possible but it is fruitful to consider that this is the ‘nuclear’ option for Russia as well,” says Hadjikyriacos.

“Europe imports around 35% of its energy from Russia, yet Russia collects around 70% of its energy revenue from the European Union, and this supply is sent mainly through pipelines that cannot be rerouted to Asia,” he explains.

The Pound to Euro exchange rate yesterday was seen a third of a per cent higher at 1.1824, bank accounts were offering euro payments around 1.1588 and FX specialists at 1.1780.

This morning, on the currency market, 1.00 British Pound = 1.1899465 Euro, making 1 EUR = 0.840374 GBP

The Euro to Dollar exchange rate is down three-quarters of a percent on the day at 1.0150, with banks offering around 0.9863 for dollar payments and FX specialists offering around 1.0117.

Russia’s latest move to cut natural gas supply to Europe meanwhile intensified global competition for LNG, the type of gas that is supplied in liquid form via tankers. Bloomberg reports Asian importers are accelerating plans to buy LNG cargoes for winter out of fear Europe will hoard supply.

European gas costs
Dutch wholesale weekend gas price rose 17% to €192/MWh

Concerning the outlook, “anything is possible but it is fruitful to consider that this is the ‘nuclear’ option for Russia as well,” says Hadjikyriacos. “Europe imports around 35% of its energy from Russia, yet Russia collects around 70% of its energy revenue from the European Union, and this supply is sent mainly through pipelines that cannot be rerouted to Asia,” he explains.

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