Islamabad July 12 2022: Pakistani exporters to European Union on the losing end as EURO slips to a 20-year low and came closer to the parity against the dollar yesterday.
Pakistani exporters shipped products worth of $ 7.6 billion to European Union in first 10 months of fiscal year 2022, a year that runs from July to June. Exports to EU are approximately one fourth of Pakistan’s total exports according to Central Bank Data. Pakistan exported products of $ 29.3 billion in first 11 months of fiscal year 2022.
The euro slid to a 20-year low and came closer to parity against the dollar on Monday on concerns that an energy crisis will tip the region into a recession, while the U.S. currency was boosted by expectations that the Federal Reserve will hike rates faster and further than peers.
The biggest single pipeline carrying Russian gas to Germany, the Nord Stream 1 pipeline, began annual maintenance on Monday, with flows expected to stop for 10 days. Governments, markets and companies are worried the shutdown might be extended because of the war in Ukraine.
Pakistan Textile industry fears to lost $ 1 billion in exports over suspension of gas and extended Eid holidays. Country is facing gas shortages as Pakistan LNG Limited (LNG) failed to obtain any LNG cargo from the international spot market.
“The most proximate concern for markets is whether or not Nord Stream 1 is going to come back online,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto, adding that “the markets will likely price in a recession” for the region if it doesn’t.
The euro tumbled as low as $1.0051 against the U.S. dollar, the weakest since December 2002.
The dollar index reached 108.19, the highest since October 2002.
The U.S. currency has gained on expectations that the Fed will continue to aggressively raise rates as it tackles soaring inflation.
“The Fed is going to raise rates more aggressively than most other developed market central banks and we don’t think other developed market central banks really have the bandwidth to keep up,” Rai said.
The Fed is expected to lift rates by 75 basis points at its July 26-27 meeting. Fed funds futures traders are pricing for its benchmark rates to rise to 3.50% by March, from 1.58% now.
U.S. consumers see inflation rising further in the year ahead but expect a more moderate pace over the longer term in a signal that inflation expectations remain reasonably anchored, a survey from the New York Fed showed on Monday.
