# Euro slips back below parity, Norwegian krone falls on planned cbank FX purchases
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-31
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Euro slips below parity as energy crisis adds to recession
Meta Description: Follow the latest updates as the euro falls against the dollar amid energy crisis concerns and ECB rate hikes. Stay informed with Reuters.
URL: https://financedigest.com/euro-slips-back-below-parity-norwegian-krone-falls-on-planned-cbank-fx-purchaseshtml

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By Samuel Indyk

LONDON (Reuters) – The euro slipped back below parity against the dollar on Wednesday and was on track for its third consecutive monthly drop as a burgeoning energy crisis adds to recession fears, while the European Central Bank pushes ahead with rate hikes.

On Wednesday, Russia halted gas supplies from the Nord Stream 1 pipeline, intensifying an economic battle between Moscow and Brussels and raising the prospects of a recession and energy rationing in some of the world’s richest countries.

[Fears that gas flows through the pipeline](https://www.financedigest.com/gsk-bets-2-billion-on-bellus-cough-drug-to-soothe-pipeline-fears.html "GSK bets billion on Bellus cough drug to soothe pipeline fears") will not resume after the planned maintenance comes to an end on Saturday have kept traders on edge.

The narrative that has helped the euro at the start of the week, which is an improvement in the gas story, is fading now which we think will [put a cap on euro-dollar,” said ING currency](https://www.financedigest.com/analysis-war-in-ukraine-puts-pressure-on-east-european-banks-to-prop-up-sinking-currencies.html "Analysis-War in Ukraine puts pressure on East European banks to prop up sinking currencies") strategist Francesco Pesole.

We’ll [know in the next few days whether the resumption of flows at the end](https://www.financedigest.com/the-end-of-payments-as-we-know-it.html "The end of payments as we know it") of the maintenance period will go smoothly or not.

The uncertainty saw the [euro slip back below parity against the dollar](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure"). It was last down 0.4% at $0.9976.

Meanwhile, [inflation in the euro zone](https://www.financedigest.com/euro-zone-consumers-more-optimistic-on-inflation-ecb-survey-shows.html "Euro zone consumers more optimistic on inflation, ECB survey shows") rose to another record in August, beating expectations and solidifying the case for further big European Central Bank (ECB) rate hikes.

A [growing number of ECB officials have been calling for oversized rate hikes](https://www.financedigest.com/analysis-investors-stick-to-bets-on-early-end-to-ecb-hikes-as-uncertainty-grows.html "Analysis-Investors stick to bets on early end to ECB hikes as uncertainty grows") to combat surging inflation, which could exceed 10% in the coming months.

Money markets are fully pricing in a 50 basis point [rate hike](https://www.financedigest.com/uk-economys-unexpected-bounce-spurs-more-boe-rate-hike-talk.html "UK economy’s unexpected bounce spurs more BoE rate hike talk") from the ECB, with a greater than 60% chance of a larger 75 basis point hike, according to Refinitiv data.

[Norway’s krone fell over 1% against the dollar and euro after the country’s central bank said it would buy more foreign currency for its sovereign wealth fund](https://www.financedigest.com/norway-wealth-fund-employee-sues-for-workplace-gender-discrimination.html "Norway wealth fund employee sues for workplace gender discrimination").

It was last down 1.2% against the greenback at 9.9315, hitting its weakest level in a month. Against the euro, the krone was down 0.9% at 9.9160, its weakest [level since](https://www.financedigest.com/ukraine-war-energy-crisis-send-german-business-sentiment-to-lowest-level-since-june-2020.html "Ukraine war, energy crisis send German business sentiment to lowest level since June 2020") Aug. 10.

The [dollar index](https://www.financedigest.com/dollar-index-jumps-after-u-s-retail-sales-show-surprise-rebound.html "Dollar index jumps after U.S. retail sales show surprise rebound"), which measures the greenback against a basket of six currencies, was last up 0.3% at 109.10, within a whisker of Monday’s two-decade peak of 109.48.

The index is on track for its [third consecutive month](https://www.financedigest.com/russian-services-activity-shrinks-for-third-month-running-in-dec-pmi.html "Russian services activity shrinks for third month running in Dec -PMI") of gains, having risen over 3% in August.

[Focus is turning](https://www.financedigest.com/entrepreneurs-worldwide-turn-their-focus-towards-doing-good.html "ENTREPRENEURS WORLDWIDE TURN THEIR FOCUS TOWARDS DOING GOOD") to U.S. non-farm payrolls data due on Friday, with a robust [job openings data on Tuesday potentially foreshadowing a strong showing in the report at the end of the week](https://www.financedigest.com/meta-plans-to-cut-thousands-of-jobs-as-soon-as-this-week-bloomberg-news.html "Meta plans to cut thousands of jobs as soon as this week – Bloomberg News"), cementing the case for more aggressive rate hikes.

Federal Reserve officials on Tuesday reiterated their support for further [rate hikes](https://www.financedigest.com/oil-falls-as-earthquake-impact-on-crude-eases-rate-hike-fears-rise.html "Oil falls as earthquake impact on crude eases, rate hike fears rise") to quell inflation, with New York Fed chief John Williams telling the Wall Street Journal that it will “take some time” before interest rates would be cut.

Traders are now [pricing in about a 70% chance of a 75 bps Fed rate hike](https://www.financedigest.com/shares-fall-with-oil-prices-amid-concerns-about-u-s-fed-rate-hikes.html "Shares fall with oil prices amid concerns about U.S. Fed rate hikes") next month, according to data from Refinitiv.

Chinese [data out on Wednesday showed that factory activity in the world’s second-largest economy](https://www.financedigest.com/stocks-yields-fall-data-suggests-u-s-economy-cooling.html "Stocks, yields fall; data suggests U.S. economy cooling") contracted again in August, as new COVID-19 infections, the worst heatwaves in decades and a property sector crisis weighed on production.

Still, [China’s yuan rose past the key threshold of 6.9 per dollar as a persistently firmer-than-expected official guidance rate discouraged investors](https://www.financedigest.com/oil-steadies-after-dipping-on-china-outlook-investors-await-fed-clues.html "Oil steadies after dipping on China outlook; investors await Fed clues") from aggressively pressuring the local currency lower.

Cryptocurrencies were staging a rebound, with bitcoin up 2.7% to $20,339, and ether, the coin [linked to the ethereum blockchain network](https://www.financedigest.com/tungsten-network-to-collaborate-with-bnp-paribas-in-offering-e-invoicing-linked-receivables-supply-chain-financing-solutions-to-large-corporates.html "Tungsten Network to collaborate with BNP Paribas in offering e-invoicing linked Receivables & Supply Chain financing solutions to large corporates"), up 5% to $1,599.

(Reporting by Samuel Indyk in London, additional reporting by Rae Wee in Singapore; Editing by Kim Coghill and Emelia Sithole-Matarise)


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