Carried away by tensions over energy in Europe and the strength of the dollar, the euro is in free fall. The single European currency has been touching its lowest level since Tuesday for almost 20 years once morest the greenback. On the night of Tuesday to Wednesday, it was thus necessary 1.02544 dollar to get one euro. For comparison, this exchange rate was around 1.14 at the beginning of this year and even 1.19 a year ago.
“Growing fears of a recession are pushing the euro down, while the dollar is soaring,” said Fiona Cincotta, analyst at City Index. Currency traders bet that the Fedthe US Federal Reserve, will continue to raise interest rates aggressively to keep inflation under control, she said.
“Parity might soon be reached”
In addition, the growth of economic activity in the euro zone slowed sharply in June in the private sector, at its lowest for 16 months, according to an index, calculated on the basis of company surveys and published by the agency S&P. Overall. In the euro zone, “the recession seems inevitable” for Neil Wilson, analyst for Markets.com. “The euro is in a desperate situation” and “unless the BCE pull itself together, parity might soon be reached.
The energy crisis is also weighing on the single currency. “Sharp increases in gas and electricity prices pose a significant risk that the EU economy will enter recession earlier than expected,” said Energy Aspects analyst Trevor Sikorski in a report. .
There is a risk of both “energy shortages” and that households, with purchasing power reduced by energy tariffs, reduce their demand, explains Guillaume Dejean, analyst at Western Union. Since the start of the year, the price of Dutch TTF, the benchmark for natural gas in Europe, has climbed nearly 150%, reaching 176.01 euros per megawatt hour on Tuesday. Before the Russian invasion of Ukraine on February 24, it was trading well below 100 euros per megawatt hour.
