Euro Falls to 20-Year Low Against USD as Fears of Recession Mount

With gas prices skyrocketing and the Ukraine crisis showing no signs of ending, the euro dropped to its lowest point in twenty years on Tuesday, fueling further concerns about a possible eurozone recession. The dollar index rose 1.29% to 106.49 while the euro lost around 1.5% for the session to reach $1.0265 against the greenback.

According to CNBC, the European Central Bank informed the markets in advance of its plan to raise interest rates for the first time in 11 years at its July meeting as a result of the record 8.6% inflation rate in the eurozone in June. The ability of the central bank to tighten monetary policy, however, may be constrained by escalating recessionary worries. Investor confidence in the 19-country eurozone has fallen to its lowest level since May 2020, according to the July Sentix Economic Index released on Monday, signaling an “inevitable” recession.

The recent increase in gas prices has contributed to Europe’s record-high inflation rate. Natural gas prices in Europe continued their steady increase on Monday, reaching highs not seen since early March. A benchmark for natural gas trading in Europe, the front-month gas price at the Dutch TTF hub yesterday saw trade up 7.8%, reaching 175.5 euros ($180.8) per megawatt-hour.

These factors have combined to negatively impact the euro. Since the beginning of the year, the euro zone’s currency has lost more than 9% of its value relative to the dollar. Recently, the euro was trading at £0.8582 against sterling and had fallen by almost 1.4% against the Japanese yen, which was already trading at multi-decade lows against the dollar.

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