The euro traded at 0.9999 for a moment before snapping higher to 1.0050.
It's the first trade below parity since 2002 and comes after the highest US consumer price index reading in more than 40 years. CPI rose 9.1% y/y compared to 8.8% expected, leading to a broad US dollar rally.
The main recent drag on the euro has been fear that Russia will cut off natural gas supplies. Benchmark TTF European gas is up another 4.5% today and year-ahead power prices are at records. The Nord Stream pipeline is under scheduled maintenance until July 21 and there are broad fears that flows -- or at least full production -- won't be restored afterwards.
The other factor for the dollar is that looking ahead, there's some deflation in the pipeline. Gasoline prices have fallen precipitously since June and if that continues, the July inflation print could be negative.
All that has led to some selling in the dollar though it's increasingly looking like it will come down to what happens at the end of the month with Nord Stream.
For the dollar more broadly, the market is now flirting with the idea of 100 bps from the FOMC at he July 27 meeting. Look for Fed officials to either endorse that move or stomp it out in the days (hours?) ahead. Current market pricing implies a 26% chance but that rose as high as 35% in the moments after CPI.
