This Tuesday, July 12, for the first time since 2002, the dollar exchange rate and the euro have reached a parity level between both coins. In this sense, it is necessary to point out that the price of the euro has continued to weaken due to the growing fear of recession in the euro area and the different rhythm of normalization of the monetary policies with the respective central banks.
The euro level and the dollar has briefly touched the equivalent level almost twenty years later, in which the euro had always been worth more than dollarsr. This has happened following knowing the substantial worsening of the confidence of the German investors.
However, just following briefly falling to the parity level, the euro price has rebounded to trade for $1.0066 following markets closed in Europe-
The situation is worrying for the economy in Europa and for the Spanish. And it is that the euro has depreciated by almost 15% once morest the dollar since the beginning of the Russian invasion of Ukraine. This depreciation has occurred as a result of the fear that the eurozone will end up entering a recession due to the impact of the conflict in Ukraine on prices and markets.
Parity of the euro and the dollar: How does it affect?
The depreciation of the euro once morest the dollar also has its impact on the pocket of the Spanish, since it influences the increase in prices and can cause a decrease in consumption. All of this can have consequences for the economy of Spain.
In this context, the European Central Bank has announced that next week will proceed to the first rate hike since 2011. Thus, a rise of 25 basis points is expected. The Fed began the normalization of its monetary policy in 2022, with an increase of 25 basis points, followed by hikes of 50 and 75 basis points, respectively.
With the parity of the euro and the dollar, the head of investment strategy for Europe at Global XMorganne Delledone, warns that “the eurozone faces headwinds with higher imported inflation, while US companies gain purchasing power.”
For their part, the Ebury analysts argue that “from now on, it will be interesting to see how the European Central Bank reacts to the latest euro depreciation«. They warn that a weaker euro has inflationary consequences. Given this situation, policymakers might choose to raise interest rates more aggressively to help the currency, assuming they can convince the markets that their new anti-fragmentation tool will actually work.
With all this situation, this Tuesday, July 12, the President of the Government, Pedro Sanchez, He has reported that he is raising taxes on electricity companies and banks. And it is that the parity of the euro and dollar highlights the depreciation of the euro in recent months.