The Russian President Vladimir Putin said yesterday that his country would significantly increase the gas supplies to the European market. The decision is made by a reason. 

That is more than any mutually agreed contractual obligations. The statement immediately caused the gas prices to fall. Instead, the currency market gets a breath of fresh air.

EUR/USD is still depressed and GBP/USD has continued to circulate within the same range since the beginning of the week. It is due to the uncertainty ahead of the US Non-farm Payroll data later tonight. 

However, as the two currencies most weighed down by the energy crisis, the euro and the compact pound strengthened on their respective cross pairs. 

The EUR/CHF and EUR/JPY rallied in a row until the start of the European session today (October 8), as did GBP/CHF and GBP/JPY. The statement made by Putin is highlighted. 

Putin Chooses the Crucial Time

The Analysts said that this Putin's remarks came at a crucial point when prices that had skyrocketed too high then entered the most corrected positions. So, what are the causes? 

The current situation arises not only because of the Putin's promises, but also due to the market dynamics. An analyst said and shared his thinking about it. 

These ferocious market dynamics seem to be a typical of the usual bubble around the peak of the cycle. That was shared by Yves Bonzon of Julius Baer and that is not the only think he shared. 

He is also confident enough that the recent surge in energy prices is only temporary and price pressures will get looser in the months ahead. Those are the possibilities ahead based on the situation. 

The Causes of this Energy Price Increase

Julius Baer views the surge in energy prices as the result of meeting of the certain "wild cards". The examples are like the bad weather that the increases energy demand.

That also depletes the inventories, as well as stoking fears of fuel scarcity. However, the sharp turmoil like this is tantamount to the occasional dynamic in the currentcommodity markets.

Further more, Bonzon believes that the prices will fall again later this year. When the highest gas price level is truly passed, the high risk assets will benefit and the appeal of safe havens fades. 

It means that the Equities have a chance to keep going. As does the pound, a trio of commodity dollars (AUD, NZD, CAD) are as well as emerging market currencies.

USD is in it’s Highest Point 

The United States dollar index (DXY) perched at a one-year high in early trading of today's European session. The EUR/USD is getting depressed below the level of 1.1550 so far. 

Besides that, the USD/JPY is at its highest level since February 2020. The greenback was mainly supported by the market confidence in the positive release of Non-farm Payroll data later in the evening.

The Federal Reserve has said it will begin reducing its bond-buying program in the fourth quarter of this year. Then, they are likely to start raising the interest rates next year. 

However, the Fed has not confirmed the mechanism or pace of reduction in bond purchases in question. The central bank may want to watch the latest economic data first before making a decision.

A Statement made by Jerome Powell 

After last September's FOMC meeting, the Fed Chairman Jerome Powell said that the upcoming payrolls report did not need to be "unusually good" to support the tapering plan.

However, that NFP report should be "pretty good". Adam Cole as the chief currency strategist at RBC Capital Markets gave his thought about these Powell's comments.

Those comments should make the markets are more tolerant of lower data shocks in particular. It is also about the balance of risks which tends to be a positive USD reaction.