On Tuesday, July 5, the euro fell to 1.0298 USD against the US dollar, its lowest point in nearly 20 years. This was due to tensions over European energy and the strength the greenback. The dollar rose 1.12% to 1.0305 USD for one euro at 11:30 AM in Paris.
Fiona Cincotta from City Index said that "growing fears of a recession drive down the euro, while the dollar soars." She said that currency traders bet on the Fed raising interest rates to control inflation.
She continues, "The PMI data (on Tuesday in Europe) highlighted the risk for slower growth at the conclusion of the second quarter."
A SANA agency published an index that was based on business surveys. It found that the private sector saw a sharp slowdown in economic activity in the Euro zone in June. This was the lowest level in 16 months.
Neil Wilson, Markets.com analyst, believes that recession is inevitable in the euro area. He said that the euro was in "dangerous straits" and that parity could be achieved "if the ECB doesn't get its act together." The single currency is also being affected by the energy crisis.
Trevor Sikorski, an analyst at Energy Aspects, stated that sharp increases in electricity and gas prices "pose a significant risk that Europe's economy will enter recession sooner then expected."
According to Guillaume Dejean, analyst at Western Union, there is a danger of "energy shortages" as well as households whose purchasing power has been reduced by energy tariffs. The price of Dutch TTF (the benchmark for natural gas in Europe) has increased nearly 150% since the beginning of the year. It reached 176.01 Euros per megawatt hour Tuesday. It was trading at a low of 100 euros per megawatt-hour before the Russian invasion on February 24.
