EUR Jumps, Stocks Advance as Risk-On Approach Returns

The Nord Stream 1 pipeline was shut down on Friday after Russian gas supplier Gazprom reported a leak. News outlets stated on Monday that Moscow would keep cutting off gas to Europe unless Western nations lifted the sanctions put in place during the invasion of Ukraine. As a result, Germany said that two nuclear power stations would continue to be maintained through April.

Moreover, German industrial orders dropped significantly in July by 1.1%, continuing the previous month’s decline and illustrating the downturn in the euro zone’s largest economy. 

For the remainder of the year, ING economists predict that the euro will stay under pressure.

“The energy crisis in Europe and the looming Eurozone recession means it is far too early to look for a sustainable EUR/USD turnaround this year. We think the dollar stays strong all year as restrictive policies slow economies and hit asset prices,” they said.

During the US session, the ISM survey from the services sector is due, projected to decline notably from 56.7 to 54.9 in August.

UK has a new prime minister

Meanwhile, in the UK, after defeating Rishi Sunak for the position of Tory leader, Liz Truss was officially announced as the country’s next prime minister. 

Later this morning, Truss will meet with Queen Elizabeth at Balmoral Castle to establish her government. She has pledged tax cuts as well as assistance for those struggling with high utility costs.

In his goodbye address, outgoing UK Prime Minister Boris Johnson promised that Liz truss, his replacement, would make every effort to help people overcome the energy crisis.

In other news, the Reserve Bank of Australia increased its cash target rate by 50 basis points to 2.35%, the highest level since 2014 and the sixth increase in interest rates so far this year. Nevertheless, the Australian dollar remained unimpressed, trading flat at around 0.68.