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Currencies: Euro and pound touch new lows after Russia cuts off energy supplies to Poland and Bulgaria

The pressure on the euro and British pound continued on Wednesday, with Russia’s cutting off natural-gas supplies to Poland and Bulgaria further fanning worries about economic growth.

The euro

traded at $1.0618, down from $1.0638 as it fell as low as $1.0590, the lowest level since April 2017.

The pound

traded at $1.2567, down from $1.2573, as it fell to a one-year low of $1.2542.

Both currencies have dropped by about 7% against the dollar this year.

As the Federal Reserve plans to ratchet up interest rates, investors are betting both the European Central Bank and Bank of England won’t be able to keep up. Russia’s war on Ukraine also hits the European economy more than the U.S. one given the proximity as well as Europe’s reliance on Russian energy supplies.

The continued slide in U.S. stocks, with the S&P 500

losing 2.8% on Tuesday, also has hit these currencies.

“A further deterioration in risk sentiment and new pressures on Europe from Russia’s threat to cut off gas supplies could continue to drive USD strength and the EURUSD lower,” said John Hardy, head of FX strategy at Saxo Bank.

He said the next levels to watch on the euro are the $1.05 level, and the 2017 low of $1.0341, before parity talk gets louder.

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