The euro briefly falls below parity against the dollar
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Weighed down by the energy crisis which threatens to plunge Europe into recession, the euro sank, on Monday August 22, below the threshold of parity with the dollar, to a level which had not been seen since the year of its release.
The greenback benefiting, for its part, from the successive tightening of the American Federal Reserve (Fed), the euro lost 0.96% around 5:30 p.m. (Paris time), to 0.9941 dollar, a lowest since 2002. The single currency was already fell below parity for the first time in mid-July.
The strength of the dollar makes imports more expensive, especially for raw materials such as oil, the price of which is fixed in dollars, accentuating an inflation that is already devastating for consumers and businesses.
Fear of a gas shortage
The announced closure, for maintenance, of the Nord Stream 1 gas pipeline, which supplies the bulk of Russian gas to Europe, between August 31 and September 2, has further accentuated fears of shortages on the Old Continent and boosted the natural gas prices in Europe. As a result, the price of European gas (Dutch TTF futures contract) soared again and reached 295 euros per megawatt hour on Monday, approaching the historic records reached in the first days of the invasion of Ukraine by Russia.
And the week could be painful for the euro. For the moment, in 2022, the currency had recovered after having flirted with the threshold of parity, but “poor PMI indicators [purchasing managers index, l’indice des directeurs d’achat] Tuesday could be enough to anchor the euro under 1 dollar”, told AFP Kit Juckes, an analyst at Société Générale. Because, on the other side of the Atlantic, despite a slight weakening of US inflation in July, the US Federal Reserve (Fed) ensures that it will continue to tighten its monetary policy.
The United Kingdom also caught in the crisis
While the American economy is less affected than Europe by the war in Ukraine, the Fed has more leeway to act than the central banks of the Old Continent. Thus, the pound sterling has also returned to its 2022 low. “It’s been a bad year for the pound, which is even falling against the euro, while the Bank of England has raised its rates at each meeting [depuis la fin de 2021] »remind OFX analysts.
Despite these increases, British inflation exceeds 10% over one year and is the highest among the G7 countries, due to the war in Ukraine, the aftermath of the pandemic, but also Brexit, which is tightening the labor market. and further disrupt UK supply chains.
At 1.1764 dollars to 1 pound, the British currency is at its lowest since the start of 2020 and the first months of the pandemic. Prior to that, the pound sterling had not fallen below $1.18 since 1985.
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