The euro reaches dollar parity

The euro and the dollar have come within one cent of reaching exactly the same value for the first time in 20 years, when the euro hovered around $1.007, a drop of almost 15% in the same year.

This milestone comes at a time when markets are increasingly fearful of a possible economic recession in Europe, coupled with high inflation and growing uncertainty over the future of Russian gas supplies.

Europe is already suffering the consequences of the Russian invasion of Ukraine and the economic scenario is not encouraging. This depreciation of the euro comes at a time when Europe is going through a severe energy crisis triggered by Russia's invasion of Ukraine last February.

This crisis, the extent of the consequences of which are still unknown, further intensifies fears about the economic recession into which Europe is beginning to slip.

On the gas issue, the Russian gas company Gazprom began maintenance work on its Nord Stream 1 pipeline 10 days ago, and there are doubts as to whether, once Moscow has finished the repairs, Russia will resume supplying gas to Europe.

Adding to this uncertainty, interest rates are reportedly rising much faster in Europe compared to the US, a situation that is attracting global markets to the US. For investors, the yields offered by US Treasury bonds are higher than European debt, which makes them prefer the dollar to the euro, taking the US currency as a "safe haven".

The earliest consequence of the euro's depreciation is the general rise in the cost of most commodities. In the oil sector, fuel prices have surpassed all-time highs, directly impacting on the pockets of consumers who see prices continuing to rise while incomes remain static.

So far this year, the euro has accumulated a depreciation of around 12% against the US currency, as a consequence of the eurozone plunging into recession due to the impact of the Russian-Ukrainian war.

While the European Central Bank (ECB) has announced that it will undertake its first rate hike since 2011 at the end of July, the Federal Reserve System (Fed) began to tighten its monetary policies in comparison with the policies applied by the ECB.

However, last March, the Fed began normalising its monetary policy again, with a 25 basis point hike, followed by hikes of 50 and 75 basis points, respectively.

Americas Coordinator: José Antonio Sierra.