- In 2008, the euro was worth 1.59 dollars. Europeans traveled to the United States on vacation and returned with suitcases full of products.
- The last time the euro traded 1 to 1 with the dollar was in July 2003, a year after it began circulating as legal tender.
- Analysts assure that the parity will eventually break and that the euro will continue to fall.
The common currency of Europe fell to its lowest level this Tuesday, July 12, compared to the US currency: came to trade at one dollar, a parity that it had not had since 2003.
The two currencies had been very close to reaching parity on Monday, July 11, when the euro traded at US $ 1,007, and then rebounded a few hundredths.
So far this year, the euro has fallen 15.5 percent against the currency of the country ruled by Joe Biden.
The parity on Tuesday was brief, since the euro recovered some of its value, but all analysts agree that it will be a matter of days before the dollar begins to be worth more than the common currency of the countries of Europe.
Euro and dollar: parity
The causes of the debacle of the euro are similar to the general causes of the global economy. Namely, market fears of a recession.
The problem is that in Europe this recession is expected to come sooner, be deeper and last longer, given the region’s proximity to the armed conflict in Ukraine.
The problem between Russia and Ukraine, added to the context of high inflation left by the end of the pandemic, have become a perfect breeding ground for the collapse of the European currency.
The boom times for the euro are far away.
Before the arrival of the subprime mortgage crisis, in October 2008, the euro came to be worth 1.59 dollars.
This caused millions of Europeans to vacation in the United States because of the relative cheapness of hotels and food. From those trips, they returned with suitcases full of electronics and clothing.
Why is the euro falling against the dollar?
The key is in the war in Ukraine. The decision of the rulers of European countries to support Ukraine by cutting off relations of states and their companies with Russia, it did not measure the consequences on the economy.
The European continent depends on Russian gas, and with winter approaching, the certainty of serious energy problems intensifies.
Importing gas from the United States or other countries is a possibility for Europe, but it is much more expensive (several times more expensive). That will push up the prices of the fares and, consequently, inflation.
Price increases are already generating crises in every country. Spain, for example, is already close to 10% year-on-year inflation and the government does not know how to deal with the problems.
The same is happening in France, Italy and the United Kingdom itself, which despite being outside the euro zone, is also suffering from the impact of the energy crisis.
What will happen to the price of the euro
According to Kit Juckes, currency analyst at Societe Generale, “Europe’s dependence on Russian energy is declining, but not so fast that it can avoid a recession if Putin shuts down or reduces gas supplies. If that happens, the parity between the euro and the dollar will most likely break and the euro will lose another 10% more”.
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