The euro fell below parity with the dollar and hit 2002 lows

The euro fell below parity with the dollar and hit 2002 lows

In addition to the difficulties related to the gas supply, this Monday the Bundesbank, the central bank of Germany, warned of the significant increase in risks that point to a contraction of GDP during the second half of the yearwhen inflationary pressures can build up to push the CPI to around 10%.

“The probability that the GDP will decrease in the winter semester has increased significantly,” said the entity, which expects that the inflation rate will reach “new highs in the fall”, when price increases in the country could reach “the order of 10%”.

“Europe’s dire energy situation suggests that the peak of inflation has not yet arrived and that there remains a risk that high inflation will remain for longer if aggressive measures are not taken by central banks“Said Tapas Strickland, chief economics officer at National Australia Bank, adding: “It is not surprising, then, to see the dollar at multi-decade highs against the euro and sterling falling.”

Remember that the US Federal Reserve started raising rates before the European Central Bank (ECB); and at a faster pace, so money has chosen to flee to the dollar so far this yearagainst a euro that has lower interest rates.

Faced with the possibility that the Federal Reserve decides to raise rates again in September, at a rate of 75 basis points, stronger than expected, the markets are choosing to turn to the dollar, one of the safe haven assets par excellence in the world , rather than risky assets. Risk assets gave up some of their recent gains, and the dollar understandably rebounded strongly against its major peers around the world.

In addition, as explained by Monex Europe, the increase in the prices of energy raw materials, a commodity as important at this time for Europe as gas, is having a role in the weakness that the euro is suffering. “The news that the price of gas in Europe rose a further 10% this morning put pressure on the euro, which fell 0.1% during the day and is increasingly closer to the threshold of psychological parity”, they point out from Monex.

Source: Ambito

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