Euro is approaching dollar in value

Photo: ANP

The euro is on the brink of equal value to the dollar for the first time in 20 years. The European single currency fell to a five-year low of just over $1.03. This is partly due to a rush on the US currency, which is seen as a safe haven for investors in turbulent times. The war in Ukraine in particular is causing unrest in the financial markets and is hindering the euro. Various experts expect the coins to be equal in value (parity) this year. The last time the dollar and the euro were worth the same was at the end of 2002.

“The euro itself is not an attractive currency at the moment,” said Francesco Pesole, currency strategist at ING. However, the bank maintains its official forecast for the euro for the next six months at $1.05. Pesole admits that parity is likely due to dollar strength and market fluctuations.

The euro’s plight is largely due to the strong dollar. This gained in value even more because the US central bank umbrella Federal Reserve wants to raise interest rates even further compared to other central banks. The fact that investors opt for investments that are considered safe, such as the dollar, ensures that the currencies come together even faster.

The outlook for the European economy has also become bleaker. This is also due to the continuing deadlock over gas supplies to Europe by Russia. Europe wants to do without Russian gas, but is not yet able to do so. The International Monetary Fund recently lowered its eurozone growth forecast to 2.8 percent this year.

Policymakers at the European Central Bank (ECB) are meanwhile faced with the difficult task of, on the one hand, curbing inflation and, on the other, minimizing the damage caused by interest rate hikes to certain highly indebted member states, such as Italy. Interest rates are expected to be raised next summer. But unlike in the US, there are no quick follow-up steps.

Next week, attention will be focused on speeches by ECB boss Lagarde. The minutes of the last ECB policy meeting are also published.

Euro is approaching dollar in value
Source link Euro is approaching dollar in value

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