1 Euro = 1 Dollar, For First Time In Two Decades In Brutal Slump

1 Euro = 1 Dollar, For First Time In Two Decades In Brutal Slump

This year’s euro slump was swift and severe. Now it has crossed an important threshold: parity with US dollars.

Multiple pressures are at work, including the Ukraine war and an energy crisis. There is also the risk of Russia cutting off gas exports. The euro area could be in recession. Add to that central banks operating at very different rates and an in-demand currency, and analysts argue parity might not be the ultimate goal, but only a way for further weakness.

Common currency fell as low as $0.9998 Wednesday, by 0.4%. This latest drop was due to US inflation increasing faster than expected in June, which boosted bets about Federal Reserve rate increases. The exchange rate was trading at $1.002 in London as of 02:10 p.m.

This downward spiral is not accompanied by existential fears that were present when the euro plunged in its early years or after the sovereign debt crisis. It’s still an issue for the European Central Bank. 

Consumers in the 12-trillion-euro economy are also affected by this inflation spike, which is already out of control and causing prices to rise at an unprecedented pace, close to 9.9%.