As a result of Russia’s announcement that it would permanently shut down its main gas supply pipeline to Europe, the euro has dropped below $0.99 for the first time in 20 years.
As European markets started on Monday, the euro was trading at 0.9893 against the dollar just after 8:00 a.m. London time, hanging just below the 0.99 level (3:00 a.m. ET). Its lows earlier in the day were close to $0.9881.
The dollar index, which compares the value of the dollar to six major currencies, also reached a level not seen in two decades when the British pound fell due to concerns about the oil supply and the expansion of the European economy.
Using the crucial Nord Stream 1 pipeline as its route, Russian energy provider Gazprom announced on Friday that it will not continue supplying natural gas to Germany. It cited an issue with a turbine.
A plan to establish a price restriction on Russian oil was approved by the Group of Seven economic heavyweights hours before the announcement.
It comes before of the European Central Bank meeting on Thursday, when analysts predict it will increase its benchmark deposit rate from 0 to 0.5% or 0.75% amid worries about how Europe will be able to satisfy its energy needs this winter and the possibility of a slowdown in GDP
According to Paolo Gentiloni, the EU’s economics commissioner, “We anticipate that Russia is abiding by the agreements that they have, but even if the weaponization of energy will continue or intensify in response to our actions, I think that the European Union is ready to react.”
As the U.K. traded, the pound was worth 1.1465 against the dollar. is getting ready to learn who will be the new British prime minister. The new premier will have to deal with an intensifying cost-of-living problem brought on by skyrocketing energy prices.
Since Brexit, August saw a 4.5% decline in the value of the pound against the dollar. One analyst predicted that due to the political and economic unpredictability, the pound would “plumb new depths” and could reach $1.05 by the middle of next year.