Euro falls to 20-year low against dollar amid fears Putin will cut off gas

Euro falls to 20-year low against dollar amid fears Putin will cut off gas

Lee Hardman, an analyst at MUFG, said it is “only a matter of time” before one euro is worth less than one dollar, after the bloc’s currency fell more than 11 percent against the dollar this year.

He said: “The main cause of the euro’s weakness remains growing concerns about a greater disruption to European economies from tighter energy supplies.”

The euro has also been hit by a divergence in monetary policy as the US Federal Reserve leads the European Central Bank (ECB) in raising interest rates. The ECB is expected to finally begin lifting interest rates out of negative territory next week, but Mr Hardman warned that “worsening energy supply constraints” will make its task even more difficult.

Economists at Goldman Sachs said Russia’s gas supply to Europe falling to zero would equate to a 35 percent price shock to the continent’s gas market, pushing bills to €500 (£423) a month.

It came as analysts in the UK raised the prospect of a monthly energy bill to £367 a month this winter, putting pressure on Britain’s next prime minister to offer more relief.

Analysis by Investec, adjusted for seasonal consumption patterns, predicted an increase that would push monthly payments to three or four times their usual numbers.

Martin Young, the senior energy analyst, said it could be “a really devastating level” for many.

He said: “The government acted when ceiling estimates were about £500 lower. In our opinion, it will have to occur again.”

The bank expects sector watchdog Ofgem to raise the annual price cap to £3,285 in October – up two-thirds from its current level of £1,971 – and then to £3,359 in January.