The EURO about to trade below the dollar for the first time in 20 years

The EURO about to trade below the dollar for the first time in 20 years

The price of the euro against the dollar accentuated its weakness this Monday and is getting closer to parity with the US currency , something that has not happened since 2002 , given the growing fears that Europe will fall into a recession as a result of the war in Ukraine and its effect on the prices of energy and other goods and services.

In this Monday’s session, the cross between the euro and the US currency reached a minimum of 1.0053 dollars per unit, the lowest level since December 2002 , 1.1% below the closing price of the session. previous.

This is not a recent process but, in total, the euro has already accumulated a depreciation of around 12% against the dollar so far this year.

Rising global inflation, reaching its highest levels in decades due to rising energy prices, and the Federal Reserve’s stance to raise interest rates in the United States more aggressively than the European Central Bank (ECB) ) are key factors in the loss of the value of the euro.

In fact, while the ECB announced that at the end of July it will apply its first rise in interest rates since 2011 , with an increase of 25 basic points, the FED already began the normalization of its monetary policy last March, with an increase of 25 basis points, which was followed by increases of 50 and 75 basis points, respectively, in the two following meetings.

Added to this is the fact that in recent months the war in Ukraine put in check Europe’s access to Russian gas and oil , the main source of energy in the euro zone, while the Russian company Gazprom began maintenance on its Nord Stream 1 gas pipeline , with Germany and other European countries, which will be extended for 10 days

While this is work that was scheduled well in advance, the fear is that, given the level of tension between Russia and the West, Gazprom could take the opportunity to simply not open the valves again, thereby affecting oil supply.

Samuel Edwards
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