Euro Slides to A 20-Year Low Against the Dollar
The euro sank to its lowest level in two decades on Tuesday as fears of a eurozone recession grew, with gas costs skyrocketing and the Ukraine conflict showing no signs of abating. The euro fell 1.55 per cent versus the dollar during the session, reaching $1.0259. The dollar index rose 1.32 per cent to 106.53.
Inflation in the eurozone reached a record 8.6 per cent in June. It forced the ECB to notify markets ahead of time that it intends to raise interest rates for the first time in 11 years at its July meeting. However, rising recessionary risks may constrain the central bank’s ability to tighten monetary policy. The July Sentix Economic Index became public on Monday. It revealed that investor morale in the 19-country eurozone has fallen to its lowest level since May 2020. This points to an “inevitable” recession.
In Europe, record-high inflation received aid in recent months from surging gas prices.
Natural gas prices in Europe continued their steady increase on Monday. Price reaching highs not seen since early March, as planned strikes in Norway exacerbated market concerns over Russian supply cuts. The front-month gas price at the European benchmark for natural gas trading was seen trading up 7.8 per cent to 175.5 euros ($180.8) per megawatt-hour last spotted trading. Since the beginning of the year, the eurozone’s currency has lost more than 9% of its value against the US dollar.
Meanwhile, the dollar’s gain continues. Risk-averse investors seek a safe haven and the US Federal Reserve starts what appears to be an aggressive rate hiking program.
After hiking benchmark interest rates by three-quarters of a percentage point in June, Fed Chair Jerome Powell predicted the central bank could hike rates again next month.
The euro sank fractionally against sterling, trading at £0.8595 by mid-afternoon. Plummeted by approximately 1.2 percent against the Japanese yen.
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