The euro and dollar are almost worth the same for the first time in 20 years. Is a recession looming in Europe?
The two currencies are a penny away from parity for the first time in two decades. Here’s what the market’s biggest concern is
The exchange rate between the euro and the dollar is a penny’s difference for the first time in nearly two decades.
Driving the news: The European currency hovered around $1.007 earlier on Monday, as concerns loom that an energy crisis might push the continent into a recession, according to CNN.
- Meanwhile, the U.S. dollar continues to gain against six major currencies. Bloomberg analysts attribute this to the U.S. Federal Reserve’s promptness in curbing a recession by raising interest rates.
Details: Bipan Rai, the North American head of FX strategy at CIBC Capital Markets in Toronto, told Reuters that the Fed is raising “rates more aggressively than most other developed market central banks,” which might make it hard for those banks to keep up.
As Art Raymond reported for the Deseret News, the Europe Central Bank has yet to make a move on raising interest rates, though it recently “signaled its intent” to raise interest rates for the first time in close to a decade.
Worth noting: The euro hasn’t sunk below $1 since July 15, 2002, brought on by “huge U.S. trade deficits and accounting scandals on Wall Street,” per The Los Angeles Times.
The biggest concern for the market is the Nord Stream 1 pipeline, the single biggest Russian pipeline that carried Russian gas to Germany.
Per Reuters, the flow was turned off for annual maintenance on Monday but experts, like Rai, worry that the shutdown will escalate due to the war in Ukraine. Rai said that “the markets will likely price in a recession” in Europe if the pipeline doesn’t come back online.