JP Morgan Bank: Euro could fall to 95 cents against dollar if gas crisis persists

The energy crisis across the continent will keep the euro trading around 0.85 pence against sterling, said Sam Zief, head of global foreign exchange strategy at JPMorgan Private Bank.

The euro risks falling to 95 US cents by the end of December and sterling could fall to $1.14, its lowest in more than two years, if a gas supply crisis this winter continues to weigh on economies, according to JP Morgan Private Bank.

Already down 12% against the dollar so far this year, sterling is starting to reflect concerns that higher gas prices will fan inflation as economic growth contracts, said Sam Zief, head of global foreign exchange strategy at JPMorgan Private Bank.

A pound at $1.14 is “absolutely within reach if gas prices continue to do what they are doing,” Mr Zief said in an interview.

Traders had recently shifted to selling the pound because of UK problems compared with earlier in the year, when the currency’s weakness was more a case of dollar strength, Mr Zief said. 

Sterling was trading on Tuesday at above $1.18, although remaining near its lowest level since March 2020.

Gas prices have surged globally after Russia’s invasion of Ukraine intensified a global energy crunch. Higher prices are expected to deepen the hit to UK household finances, while the threat of shortages could further slow economic activity in the country.

Mr Zief also predicted more losses for the euro, saying he expects the currency to fall to 95 US cents by the end of December if gas prices stay at or exceed currently elevated levels. The energy crisis across the continent will keep the euro trading around 0.85 pence against sterling, he added. 

Bloomberg