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The possibility of a recession, derived from the energy crisis, caused the euro to suffer a new setback against the US currency only 41 days after trading below it in almost 20 years. The situation, which caused losses in the main European markets at the beginning of the week, coincided with the report from the Bundesbank, the German Federal Bank, that a loss in economic activity is possible.
The euro, legal tender in 19 of the 27 countries of the European Union, was quoted on August 22 at 0.9 dollars per euro, its lowest level in five weeks after losing parity for the first time in recent 20 years.
The euro’s decline, in part, comes after the dollar benefited from the determination of some members of the Federal Reserve to tighten monetary policy at the next meeting. On the other hand, the exchange variation also responds to fears that the main economies of the bloc will fall into recession as a result of the rise in energy prices and the possibility of gas shortages before winter.
So far this year, the loss in value against the dollar has once again exceeded 12%.
Fears have been increasing since last August 19 when Russia, through the company Gazprom, announced that it would stop the supply of gas through the Nord Stream 1 gas pipeline under the argument of carrying out maintenance work.
Additionally, the Bundesbank, the German Federal Bank, reported that high energy prices coupled with high levels of inflation and the crisis in the supply chain could lead the German economy into recession.
“The decline in economic activity during the winter months has become increasingly likely (…) The high degree of uncertainty about gas supply this winter and the strong price increases are expected to weigh heavily on households and companies,” explained the German Federal Bank.
For the experts of the Bundesbank, which has already announced a stagnation of the German economy during the second quarter of 2022, the recession could be generated from the first quarter of the year 2023.
Since the beginning of the Russian invasion of Ukraine at the end of February, the European Union, highly dependent on Russian oil and gas, has sought other suppliers of the element.
Russia, meanwhile, has sought to circumvent the sanctions imposed by demanding payment of its resources in rubles, something that has been rejected by the nations of the European bloc and has led to the interruption of Russian gas in some countries on the continent.
On the other hand, gas prices increased by 20% after Moscow’s announcement and the uncertainty in Europe that the closure will last beyond three days.
Benchmark futures rose towards 300 euros per megawatt hour, putting pressure on electricity and coal prices to record highs.
With Reuters and EFE
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