The euro reached its lowest level in more than 20 years by 10:00 GMT on Tuesday, falling to $1.
The stock markets declined as a result of the euro’s parity with the dollar and the possibility of additional central bank tightening as well as concerns over the global economy’s stability.
Recent weeks have seen the US dollar soar to two-decade highs against a variety of other currencies, strengthening its position as the preferred currency for investors concerned about the economic outlook.
A continuing rise in natural gas prices’ impact on the local economy as well as the conflict in Ukraine have made the euro particularly vulnerable. The European Central Bank has lagged behind competitors in increasing interest rates.
The move towards parity, according to Mizuho analysts, is taking place as “the downturn in the eurozone is priced in,” and the overall environment does not appear to be improving risk sentiment.
For the European Union, this is a “catastrophe,” according to SG Futures, as energy imports may become more expensive.
“Energy supply is already unaffordable and as we head into winter it’ll likely get even worse,” it added on a tweet.
The dollar index has been moving higher as a result of the euro’s weakness, as well as concerns about global economic growth as China, in particular, enforces strict zero-COVID policies to control new outbreaks.
The presumption that the Federal Reserve will raise rates faster and further than peers is, however, arguably the main reason for the dollar’s increase.
