Investors, particularly on the Old Continent, remain fixated on gas and electricity contract prices that reflect the severity of the crisis and deep recession. The panic in these markets dimmed just as quickly as it had earlier erupted with the news that German crude storage facilities were being efficiently filled ahead of the upcoming heating season. While this can hardly be considered shocking news, the sharp, in the case of some contracts, 20% plunge in prices took some pressure off both the euro and currencies particularly sensitive to its fate, of which the zloty is an example. On Tuesday morning, the single currency costs almost exactly the same as the dollar.
European natural gas storage facilities were expected to reach a fill-up of 80% in early November. This state was reached at the end of August. The high daily build-up of stocks in Germany and their markedly faster recovery than last year was public information also in the previous week when energy prices were soaring to record highs. This reflects how choppy and volatile energy prices have become.
Three things should be noted here. Firstly, despite the sharp turnaround, the gas price in the contract with delivery in a month's time is still as it was a week ago. Secondly, due to maintenance work, the three-day suspension of deliveries via Nord Stream starts tomorrow. As always, there is a risk that these will not be resumed on time or that the crude will flow to the west in an even narrower stream than before (20% of typical flows). Russia is playing the card of the European Union's energy dependence, and this will not change. Thirdly, even storage facilities filled up to the brim will cover one-third of consumption during the heating season. The energy markets that investors are watching will remain weather-dependent in the coming months. Not only in winter but also at the end of summer, as the cooling temperatures in southern Europe announced for next week will reduce current consumption more sharply. This means that the latest reshuffle, although positive for the euro against the main currencies and the zloty, as well as the forint and Swedish krona, may not prove to be permanent.
The currencies, bonds and stock indexes also continue to be influenced by Friday's speech by the Fed chief, during which he clearly declared his loyalty to the strategy of seeking to suppress inflation as quickly as possible, even at the expense of economic growth. At the moment, the market is pricing in a greater than 75% probability of a third consecutive rate hike of 75 basis points at the meeting to be held in three weeks' time. In the coming days, the biggest test for such an inflated valuation will be Friday's labour market report. Today, in turn, we will get information on consumer sentiment (which should be negative) and statistics reflecting the number of open recruitment processes (the number of unfilled vacancies should still be well over ten million). The impact of the Federal Reserve's rate path revaluation has not been enough to pull the EUR/USD away from parity. This is partly due to the collapse in energy prices, but the common currency is also being resisted by the simultaneous tightening by the ECB. The space for a stronger discounting of the dollar will open up if the main currency pair's exchange rate breaks through Friday's highs, which it is currently less than 1% short of.