Euro vs US Dollar: PARITY!
On Wednesday morning, the Euro hit parity with the US Dollar, as the two currencies had a 1:1 exchange rate. This was the first time since 2002, when the Euro was still a relatively “young” currency.
Why? There are many reasons for the relative decline of the Euro: the ongoing conflict in Ukraine, which has triggered the energy crisis and recession, the hawkish monetary policy from the Fed leading to higher interest rates, pushing investors toward the greenback, that has always represented a safe haven during crises.
Investors are closely watching how this Euro’s weakness will affect ECB’s next monetary policy decisions. The Central Bank will surely join the hawkish club (with some delay, probably), but it’s still not clear the size of the increase in interest rates. It will be crucial finding a balance between the need to fight inflation, sustaining the currency and avoiding a recession.
Source: Bloomberg, CNBC