Euro-Dollar Parity : Is it Good or Bad?
For the first time in 20 years,
The USD appears to be the only currency that is maintaining its ground despite recession predictions, while all other currencies reach fresh lows.
One of the reasons for this is that, as the world's reserve currency, the US dollar is regarded as a safe haven currency during volatility.
The Euro and the US Dollar reached parity on July 12.
So, 1 Euro is equivalent to 1 USD.
Since the start of the year, the euro has fallen by around 12%, much of it as a result of collateral damage from Russia's invasion of Ukraine.
What are the reasons for this fall?
Europe decided to decrease its dependency on Russian crude by the end of this year as a result of Russia's invasion of Ukraine.
Just as winter is about to arrive, Russia made a strategic move to temporarily stop gas exports through the Nord Stream 1 pipeline.
Due to the high demand for energy during the winter season, this decision will have a significant negative impact on the eurozone.
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When an economic slowdown is combined with an energy crisis, it raises questions about how effectively the European Central Bank can tighten monetary policy to reduce inflation.
As the European inflation rate stands at 8.6%, the ECB indicated that it will raise interest rates this month for the first time since 2011.
For an economy that has been hit the worst, they are surely the last ones to address it.
One benefit of this circumstance is that the tourism industry in Europe will draw a lot more American visitors.
Speaking of their financial situation, even though the ECB has hinted at a probable interest rate increase soon, it is unlikely to be as significant as the FED.
For these reasons, top analysts on Wall Street do not see the currency rebounding in the near future.
It?was?first?claimed?that?the?Euro?would?outperform?and?double?in?value?versus?the?US?dollar,?but?it's?clear?that?the?EU?is losing?the?war for now.
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