EUR/USD Update: Recession Fears, as Reduced Russian Gas Grips Germany

[MongiIG]

Jun 24, 2022 | DailyFX
Richard Snow, Analyst

EUR/USD NEWS AND ANALYSIS

• EU leaders converge on Brussels today to discuss critical gas shortages ahead of the winter period
• EUR/USD potential ‘double bottom’ formation faces upside challenges
• ECB’s Forum on Central Banking next week could provide insight into mystery “anti-fragmentation” tool

EU LEADERS HEAD TO BRUSSELS TO DISCUSS SERIOUS GAS SHORTAGES
EU leaders have make their way to Brussels to continue discussions around solutions to the current gas supply issue that has dire consequences for Germany’s industrial sector this winter. Russia has supplied around 60% less gas than requested by Germany which has knock on effects for other countries within the euro zone as alternative supply remains sparse.

German Economy Minister Robert Habeck warned that some industries may have to shut down in the winter if Russian supply remains at current levels. European countries typically use this time to store gas needed for the cold winters and shockingly low inventory levels will likely result in tough choices having to be made. Earlier this week the German Minister raised the “alarm stage” to a level where soon gas companies will be able to pass on higher energy costs directly to consumers. Prior euro gains on the back of the European Central Bank’s (ECB) suggested 25 basis point hike in July, with a possible 50 bps hike in September is likely to be capped by growth concerns for Europe’s largest economy.

An additional headache surfaces in the form of the Nord Stream 1 pipeline which is due to undergo planned maintenance between 11 and 21 July. A slow return to service threatens to tighten gas supplies even further.