The euro has been more valuable than the US dollar for almost 20 years. However, the growing risk of recession in the euro zone and the interest rate hikes by the US Federal Reserve are putting the common currency under pressure. Analysts expect a further drop in value.
The euro is worth exactly one US dollar again. The course of the European common currency continued its downward trend of the last few weeks and at midday fell to par for the first time in almost 20 years. The last time the euro and US dollar could be exchanged one for one was in 2002, when the euro became the official currency of the euro zone.
Analysts explain the development with the effects of the Ukraine war, which hit Europe particularly hard, the growing risk of recession in the euro zone and the aggressive rate hikes by the US Federal Reserve. At least in the short term, they assume that the European common currency will continue to lose value. “I’m afraid that once this dam has broken, the euro could nestle under it until we – hopefully – know at the end of next week whether the gas is flowing again,” said Commerzbank analyst Antje Praefcke.
The weakness of the euro is inconvenient in the current environment with comparatively high inflation rates. Because the lower the exchange rate of the common currency, the stronger other currencies such as the dollar become in relation to it. As a result, goods imported into Germany become more expensive. This fuels inflation.
When the euro exchange rate falls, consumers have to dig even deeper into their pockets to cover their living expenses. Above all, energy and raw material prices threaten to rise further.
