The euro fell below the break-even rate against the dollar in mid-July, with mounting pressures on the eurozone economy, and increasing speculation about a recession.
The euro currency has lost about 12.5 percent of its value against the US dollar since the beginning of this year, while the dollar index, which measures the currency’s performance against 6 major currencies, including the euro, has risen by about 14 percent since the beginning of 2022.
The dollar benefited from the successive decisions of the US Federal Reserve to raise interest rates, and the strength of the dollar makes imports more expensive, especially for primary materials such as oil, whose price is determined in dollars, which increases inflation that is harmful to consumers and companies.
A painful week for the euro
Morgan Stanley analysts expected the euro to decline during the third quarter of this year to $0.97, its lowest level since it began trading in 2002.
The US investment bank “Nomura International” also expects the euro to decline to $0.975 by the end of next September, and as a result, the market may look for the level of $0.95 or less, as pressures on energy supplies increase the risks of power outages and is likely to raise the euro’s imports.
“Europe is preparing for another shutdown of the Nord Stream 1 pipeline later this month,” OANDA analyst Craig Erlam told AFP.
The Russian company, “Gazprom”, announced last week that it would stop the flow of natural gas supplies through the “Nord Stream 1” pipeline to Europe between August 31 and September 2nd.
As a result, the price of European gas (the Dutch TTF futures contract) rose again and on Monday reached 295 euros per megawatt-hour, close to its highest levels ever since the early days of the Ukraine crisis.
“The sword that hangs over Europe’s head remains,” warned Kate Jukes, an analyst at Societe Generale.
It could be a painful week for the Euro. He added that the euro always recovers after reaching parity with the greenback, but “weak PMIs Tuesday may be enough to hold the euro under the dollar.”
And the German news agency said that analysts expect the European currency to continue to decline in the coming period.
Germany’s exports outside the European Union fell 7.6 percent month-on-month in July, a weak start to the second half of Europe’s largest economy, according to the German Federal Statistical Office.
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