On Tuesday, the euro hit its lowest level against the U.S. dollar in nearly 20 years, hitting $1.0306 per euro. It fell 0.51% to 85.62 pence against the pound, hitting $1.20 in trade, hurt by energy-related tensions. US currency strength gains from Europe and politics Central bank tighter money.
The dollar rose 1.03% during trade, registering 1.0315 per dollar against the euro.
“Growing fears of a recession are pushing the euro lower while the dollar rises,” said Fiona Cincotta, an analyst at CitiIndex. He added that moneychangers are betting that the central bank will continue to raise interest rates to keep inflation under control.
Also, “PMI data released in Europe (Tuesday) showed a risk of growth slowing at the end of the second quarter.”
In addition, growth in economic activity in the euro area fell sharply in the private sector in June, hitting a 16-month low, according to an indicator based on business surveys published by S&P Global.
In the euro zone, “a recession appears inevitable,” said Markets.com analyst Neil Wilson, adding that “the euro is in dire straits” and “unless the European Central Bank acts, the exchange rate will soon suffer.”
The energy crisis casts a shadow over the single currency.
“The sharp rise in gas and electricity prices poses a significant risk of the EU economy entering recession sooner than expected,” Energy Features analyst Trevor Sikorsky said in a statement.
For his part, Guillaume Duggan, an analyst at Western Union, explained that there is a risk of energy supply shortages and that households with lower purchasing power due to higher energy costs will reduce demand for them.
Since the start of the year, gas prices in key European market Dutch TTF have risen nearly 150% to reach 176.01 euros per megawatt-hour on Tuesday.
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