The euro is crashing while the dollar strengthens to record highs. Here's what to know.
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Phil Rosen
Jul 7, 2022, 17:20 IST
Christine Lagarde is leading the European Central Bank during a tumultuous period.Pool/Getty Images
Happy Friday eve, readers. Phil Rosen here in New York.
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All you market watchers are in for a currency treat — the dollar and euro are nearing a one-to-one equivalence for the first time in about two decades. That means traveling the continent is unusually cheap for Americans right now.
But what's happening isn't some random occurrence. It's a result of a series of events that fell in line for us to find ourselves talking about parity today.
Buckle up.
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1. The euro has slumped but it could fall another 10%, Societe Generale said Wednesday. The weight of Europe's energy crisis and the European Central Bank's bond-rout response are pulling down the common currency.
That all makes the euro "unbuyable" right now, as the shared currency dropped another 1% yesterday, moving below $1.02 for the first time since November 2002.
SocGen's chief currency strategist pointed to Russia's gas pipeline as one potential pain point.
"Europe's energy dependency on Russia is falling, but not fast enough to avoid recession if the pipeline is closed. If that happens, EUR/USD will likely lose another 10% or so," he wrote.
Compared to the dollar, traders remain wary of the euro because the European Central Bank hasn't raised interest rates as aggressively as the Federal Reserve — which has contributed to a strengthening dollar.
"It could be a very long winter," the money manager said as the euro notched a fresh 20-year low.
3. On the docket: Levi's, Seven & i Holdings Co. Ltd., and Helen of Troy Ltd., all reporting. Plus, look out for the goods and services trade balance, expected to be released by the Bureau of Economic Analysis at 7:30 am ET.
5. China isn't interested in ramping up fuel exports amid the ongoing global energy crunch. Beijing called for 40% lower quotas for state and private refiners compared to last year, according to a Bloomberg report. Here's what you want to know.
6. A veteran market strategist said oil, lumber, and copper are key commodities that are all signaling a recession is likely to hit this year. Strategist Joe Terranova told CNBC that people shouldn't be having conversations about the downturn that could come in 2023 — but the one that could come in 2022.
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