ECB's concerns, energy prices tilt EUR/USD risks to the downside
Nov 21 (Reuters) -EUR/USD traded near flat Thursday, continuing to consolidate the drop from the Nov. 6 high as markets await November PMI reports, but energy prices and a warning from the ECB could lead to lower levels for the pair.
Cold weather in Europe helped drive Dutch TRNLTTFMc1 and British <TRGBNBPMc1 > wholesale gas prices to a 1-year high and fueled expectations for prices to rise further.
Higher energy prices could strain household, business and government finances unless cheaper alternatives are delivered.
Imports from the U.S. are a cheaper alternative and an increase of gas shipments from the U.S. could contribute to downward pressure on EUR/USD.
The ECB's Financial Stability Review released Wednesday indicated concerns about sovereign debt levels have risen. Rising interest costs, high levels of sovereign debt and policy uncertainty helped fuel those concerns.
Yield spreads with large economies such as France, Italy and Spain over the German 10-year bund are widening as investors hedge rising prospects for debt stress. Widening spreads are likely to keep EUR/USD from gaining much upward momentum.
Euro area November HCOB PMIs and German Q3 GDP reports will be released Friday. Data indicating deteriorating economic growth could increase investors' uncertainty and sink EUR/USD towards long-term support near 1.0450.
A break of that support could trigger stop selling and bring parity into focus.
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gaseur https://tmsnrt.rs/48XnkGN
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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