On Tuesday the Euro fell almost touching parity with the dollar. The orbit has not crossed for two decades, weighed down by the likelihood of recession triggered by an energy crunch. An ECB rate raised campaign that lags far behind that of the Fed.
The Euro Falls To Near-Parity With U.S. Dollar After 20 Years
The dollar index is a measure against 6 counterparts, with the euro most heavily weighted. The Euro was up 0.3% at 108.45. Previously, it was raised to 108.47, the highest rate was seen in October 2002.
The euro has borne the brunt of dollar strength but falling by $1.00005. It is the lowest rate since December 2002. A level some analysts flagged as parity being tested.
Neil Jones is the head of currency sales at Mizuho Bank. He said that a large queue of buy euro orders at $1 to either increase cash exposure via purchasing spot or option structures was reserving the euro steady around those levels.The euro arrived close to being tipped over the edge after a dire reading from the Zew economic research institute. The institute showed German investor sentiment nosedived in July to -53.8 points from -28.0 in June.
The biggest line carrying Russian gas to Germany, the Nord Stream 1, started annual maintenance on Monday. It is expected that flows will stop for the next 10 days. But the Governments and marketers are worried that Russia may extend the shutdown, enhancing the energy crunch and tipping the economy into recession.
What Is The Opinion Of Analysts?
According to the analysts, the weak economy suddenly raises over the European Central Bank’s plan to raise interest rates, primarily by 25 basis points in July, after that by 50 bps in September.
What Did The Senior Economist At Standard Chartered Say?
As per the information, senior economist Sarah Hewin at Standard Chartered said that there did not seem to be a lot of support for the euro at this point. It did not relate to gas prices but to what seemed to be a split within the ECB over how far they raise the rate. The expectation for the United States Federal Reserve is to do 75 bps this month. It is suspected that the aim is to get with ECB, it’s more of a mixed message given the backdrop over gas.
The step toward parity has raised speculation about ECB intervention. According to the source of ECB, Reuters, there’s no hunger to interfere. Lastly, the Bank stepped into the single currency in 2000.
What Is Going To Happen Next?
The major factor in the dollar’s rise. Although, it is the view the Fed will hike rates faster and further than its peers. It is awaited that the price rate will reach 3.50% by March with Fed Funds and it will raise from 1.58% presently.
The consumer price data for the United States is due on Wednesday. It is expected to show an 8.8% annual rate for June. Though the dollar slipped to 136.94 yen, down 0.4%, following the jump of Monday to new 24-year highs at 137.75.
The Global economy fear is undermining commodity prices. The Australian dollar rose 0.22% to $0.6728 and previously matched the 2-year low of$0.6716 reached on Monday.