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Gas prices surged more than 30% on Monday after Russia announced late on Friday it will keep its main gas pipeline to Europe shut. European policymakers are debating ways to curb demand and prevent an energy crisis. The euro fell more than 1% from trading above parity with the dollar, to reaching less than 0.99 at one point on Monday. On the positive, Europe is already important gas from the US and partners and has shown resilience in finding ways around energy shortages such as filling its reserves in anticipation of next winter. Nonetheless, economists worry the surge in energy prices could throw the European continent in recession. 

The Swiss franc is having a hard time against the dollar. The haven currency is weakened by nearly 3% since the start of the month. The worsening Swiss KOF leading indicator yesterday together with today's softer ZEW expectation reading are signalling a weaker economy for the land of cheese and chocolate. Nonetheless, traders need to be cautious as the Swiss National Bank has previously mentioned that it will step into the forex market should the currency weaken too much.

The KOF Leading Indicators Index which is designed to predict the direction of the Swiss economy over the following six months continued to fall for 4 consecutive months to 86.5, the lowest level since July 2020. The deterioration comes amid a wider energy crisis in the eurozone and stricter liquidity conditions in the markets as central banks across the world try to take control of inflation. 

The euro jumped above parity against the dollar, after German GDP for the second quarter came stronger than expected, at +1.8% versus 1.5% year-over-year. Government and also consumer spending supported the German economy. More China stimulus to the rescue also helped boost sentiment. Later today the European Central Bank will publish the account of monetary policy meeting, which could give more clues about its future interest rate decisions. Stocks are higher 0.6-1% on improving sentiment, despite investors still anxious of Powell's speech on Friday. 

The dollar hit a five-week high versus major peers on Monday morning as investor sentiment continued to weaken ahead of Friday's Jackson Hole meeting and US inflation data (PCE). Fed speakers have been stressing the message last week that more rate hikes are coming, that is despite data showing that inflation is cooling down, but remains hot. There are growing expectations that Fed Chair Powell will announce the end of tightening is still far away. The EURUSD edged closer to parity (1.0001), under pressure as Russia said it will halt gas supplies to Europe for three days at the end of the month. Similarly, European and US stocks are trading around 1% lower.