Although the PMI for business activity in Europe was not as bad as feared, analysts said there was likely to be more gloomy news for the economy as gas prices rose to record highs ahead of winter.
The euro was trading at $0.9920 and is expected to fall further to $0.9600 in December, given Europe’s worsening outlook, said Monica Defend, director of the Amundi Institute. “The United States and the euro zone are going their separate ways,” she said.
Other currencies such as the British pound recovered some ground after the PMI data, but were not far from a two-and-a-half year low hit earlier at $1.1718.
“Renewed concern about Europe after rising gas prices is the main reason for the euro’s decline,” said Holger Schmieding, chief economist at Berenberg.
Benchmark gas prices in the European Union soared 13% overnight to an all-time high, having doubled in just one month to 14 times the average of the past decade.
“I don’t see the Ukraine war going to end any time soon, that would be the catalyst for a market rally. That’s going to keep the pressure on energy prices and as for the euro, the only way is down.” said Michael Hewson, head of markets at CMC Markets.
Russia will cut off natural gas supplies to Europe via the Nord Stream 1 pipeline for three days at the end of the month, the latest reminder of the precarious state of the continent’s energy supply.