After weeks of approaching parity with the U.S. Dollar, the Euro fell to a 20-year, record-low Monday.
For the first time since Dec. 2002, the Euro and the U.S. Dollar were exchanged at a rate of one-to-one. The Euro has recovered a little since Monday. However, the two currencies were still close to parity on Tuesday afternoon.
The euro slid to a 20-year low and came closer to parity against the dollar on concerns that an energy crisis will tip the region into a recession, while the U.S. currency was boosted by expectations that the Fed will hike rates faster https://t.co/fC2FP3QFgZ pic.twitter.com/OwQOpfi16U
— Reuters (@Reuters) July 12, 2022
The Euro dropped due to an onsetting recession, as well as the economic consequences of the Ukraine war. Workers began annual maintenance on the Nord Stream 1 gas pipeline maintenance on Monday, cutting off parts of Europe from gas for a minimum of ten days, Reuters reported. The continent’s energy crisis has reached a peak, and some economists worry that the pipeline’s shutdown could last longer due to Russia’s invasion. (RELATED: Democrats Urge Biden To Boost Oil, Gas Drilling Amid Energy Crisis)
Euro at 20-year low, to within one cent of parity with the dollar. High inflation and the prospect of an energy shortage—should Russia cut off Europe’s gas supply this winter — raise prospect of recession. Euro was trading at around $1.15 in February
— Andrew Neil (@afneil) July 12, 2022
Contrary, the USD rose in anticipation of the Federal Reserve Bank continuously increasing interest rates. They are projected to jump up to 3% by the end of the year, as compared to 1.58% now, CNBC reported. (RELATED: Federal Reserve Hikes Interest Rates For First Time In Three Years)
While the Euro dropped as low as $1.0005 against the U.S. dollar, the dollar index climbed to 108.19, a 20-year-high since Oct. 2002, according to Bloomberg. The dollar index is a measuring unit of the USD value relative to other foreign currencies.