Euro drops below $1 for first time since 2002 | European Union News

The European Union’s common currency fell to $0.9998 after official data showed US inflation spiked in June.

The euro fell below the symbolic level of $1.00 for the first time since December 2002, due to Dark economic outlook for the single currency area and the possibility of a complete shutdown of Russian gas supplies.

The euro was pushed to $0.9998 on Wednesday after official data showed US inflation spiked in June, raising expectations the US Federal Reserve will tighten interest rates further. .

The rise in borrowing costs across the Atlantic makes the US dollar more attractive to investors.

“Gas rationing, stagnant inflation, an expected recession, all of these are good reasons for the euro to fall,” said Stuart Cole, head macro economist at Equiti Capital in London. “.

He believes that these factors will make it harder for the European Central Bank (ECB) to raise interest rates, making the interest rate gap with the US widen.

History of Euro

Since being made available for free in 1999, this currency has spent very little time below parity. In fact, the last time it did so was from 1999 to 2002, when it dropped to a record low of $0.82 in October 2000.

During its relatively short 20-year history, the euro is the second most sought-after currency in global foreign exchange reserves and daily turnover in euro/dollar is the highest among currencies. on the global market of $6.6 trillion per day.

The euro’s slide is a headache for the ECB. Letting the currency depreciate only increases the record-high inflation that the ECB is fighting to contain. But trying to sustain it with higher interest rates could exacerbate recession risks.

So far, the ECB has rejected the issue, arguing that it has no exchange rate target, even if currencies really matter.

Also on a trade-weighted basis – relative to the currencies of trading partners – the euro is down just 3.6% this year.

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