Natural Gas Price Spike Falls Short of Euro-Dollar Impact
A subscriber to financial writer Robin J Brooks' posts asked him to explore the impact of natural gas price spikes on the EUR/USD exchange rate. Brooks, who funds his data costs out-of-pocket through supporter contributions, obliged.
The current rise in natural gas prices, particularly the benchmark Title Transfer Facility (TTF) in Europe, has some worried about its effect on the euro. However, according to Brooks, this year's increase is still too small to significantly impact EUR/USD.
The TTF front-month futures price has risen, but it remains near its March peak after the war began. In contrast, Brent prices have dropped following hopes of resumed US-Iran negotiations. Brooks notes that while the rise in TTF prices may appear dramatic, it pales in comparison to the 2022 spike.
A chart analyzing EUR/USD's sensitivity to TTF prices shows a low correlation between the two. It took a massive spike in 2022 for EUR/USD to fall below parity, and Brooks believes this year's increase does not come close to triggering such an event.