The euro fell below parity with the dollar on Monday, to levels it has been circulating since the year it was launched, weighed down by the energy crisis that threatens to plunge Europe into recession.
For its part, the greenback benefited from the gradual tightening of the American Federal Reserve (Fed), the euro lost 0.96% at around 11:30 a.m. (Québec local time) to $0.9941, its lowest level since 2002.
The strength of the dollar is making imports more expensive, especially of commodities like oil, which are valued in dollars, and amplifying inflation that is already devastating for consumers and businesses.
“Europe is preparing for another closure of the Nord Stream 1 pipeline later this month,” Oanda analyst Craig Erlam told AFP.
Gas giant Gazprom has warned that gas supplies will be halted for “maintenance” from August 31 to September 2, at the risk of reigniting fears of shortages in Europe, where Russia is accused of energy blackmail.
As a result, the price of European gas (Dutch TTF futures contract) surged again, hitting €295 per megawatt-hour (MWh) on Monday, nearing all-time highs set in the early days of Russia’s invasion of Ukraine.
“The sword of Damocles hanging over Europe will stay there,” warns Kit Juckes, an analyst at Societe Generale.
And the week could be painful for the euro. For now, the currency had rallied in 2022 after flirting with the parity threshold, but “bad PMI indicators on Tuesday could be enough to anchor the euro below a dollar,” he warns.
Because on the other side of the Atlantic, the US Federal Reserve (Fed) is making sure that it will continue to tighten monetary policy, despite a slight slowdown in US inflation in July.
“A new opportunity for the Fed to persuade the market will be the Jackson Hole symposium at the end of the week,” comments Ulrich Leuchtmann, an analyst at Commerzbank.
The Fed chief will speak at this meeting of central bankers on Friday.
While the American economy has been less affected by the war in Ukraine than Europe, the Fed has more room for maneuver than the central banks of the old continent.
With that, the British pound has also returned to its 2022 low.
“It’s a bad year for the pound, falling even against the euro while the Bank of England has hiked rates at every meeting since late 2021,” OFX analysts remind.
Despite these increases, UK inflation exceeds 10% over a year and is the highest in the G7, due to the war in Ukraine, the fallout from the pandemic, but also Brexit, which is tightening the labor market and further disrupting UK supply chains .
At $1.1764 to the pound, the British currency is trading at its lowest level since early 2020 and the first few months of the pandemic. Previously, the British pound had not fallen below $1.18 since 1985.