The US dollar is the strongest against the euro since mid-2017. The euro could be bought for less than 1.06 US dollars on the foreign exchange market on Wednesday. Investors are reacting to the interruption of natural gas supplies to Poland and Bulgaria by the Russian Federation.
The single European currency has already weakened by more than four percent against the US dollar during April. This is the biggest one-month fall in the euro/dollar exchange rate in more than seven years. Several factors are to blame, almost all of them stemming from the war in Ukraine.
Investors are getting nervous
Fuel to the fire has been added by the current closure of gas taps on the pipelines through which Russia supplies natural gas to Poland and Bulgaria. Although neither of the countries in question is a member of the eurozone, investors are getting nervous about Moscow’s next possible moves. In the future, Russia could stop supplies to other EU member states if it concludes that they are not complying with ruble gas payment requirements.
Factors weakening the euro
Another factor weakening the euro or strengthening the dollar is the upcoming US Federal Reserve meeting. The markets are speculating whether the Fed will raise interest rates again next week and to what extent. The minimum hike should be 0.5 percentage point, but a more dramatic increase is not ruled out.
