Forget about the EUR/USD chart, this is the one that matters for the future of Europe:
That's the European benchmark natural gas price. Prior to the pandemic, it traded in the €10-30 range for a decade.
Through much of Europe that gas isn't just for heating or industry, it's the swing producer of electrical power. Because of that, prices of energy have spiked to record highs in Germany and France.
At the moment, the gas taps from Russia are completely turned off. That's because of annual scheduled maintenance on the Nord Stream pipeline. That's planned to wrap up on July 21.
European politicians seem to believe that they won't be turned back on.
"Let's prepare for a total cut-off of Russian gas; Today that is the most likely option," said French Economy and Finance Minister Bruno Le Maire on Sunday.
Last week, German chancellor Scholz also cast doubt on a Russian story that a missing turbine was responsible for tapered gas supplies.
"No one believes in technical problems with supply problems," he said.
Presumably, European leaders know something that we don't but at the same time, do you really want to trust a politician in a trade?
So we'll play the waiting game until we hear from the Russian side or until July 21 but no one is stepping up to buy the euro until then.
What's priced in?
I don't think the market has priced in a cutoff in natural gas supplies. If it happens, it will be catastrophic for any industry that relies on cheap power and a major hit to European wallets. It would ensure a recession and risks some kind of new escalation in the Ukraine war. We could be seeing a much lower euro from here.
