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    Home»Business»Euro falls below parity with dollar amid surging inflation
    Business

    Euro falls below parity with dollar amid surging inflation

    By July 14, 2022No Comments3 Mins Read
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    Euro falls below parity with dollar amid surging inflation
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    Euro falls below parity with dollar amid surging inflation


    The euro fell below the dollar for the first time in two decades before inching back above parity after data on Wednesday showed US consumer price inflation surged to a more than 40-year high in June.

    The single currency plunged to $0.9998 against the greenback on the bleak CPI news, breaking below the $1 level for the first time since December 2002. It bounced back to last trade at $1.0061.

    The euro is viewed as having support at the $1 area.

    The dollar index reached 108.59, the highest since October 2002, before falling back to 107.95.

    The US annual consumer prices jumped 9.1% in June, the largest increase in more than four decades, leaving Americans to dig deeper to pay for gasoline, food, healthcare and rent.

    “This morning’s number is staggeringly high. It’s higher than expected and shows that inflation is going quickly in the wrong direction,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

    US dollar and euro.
    The euro plunged to $0.9998 against the greenback after the data, breaking below the $1 level for the first time since December 2002.
    ZUMAPRESS.com

    The euro is being hurt as the region faces an energy crisis sparked by sanctions imposed on Russia due to its invasion of Ukraine.

    “The sanctions that are trying to hurt Russia are also hurting the European Union,” said Lou Brien, a market strategist at DRW Trading in Chicago. “They are in a tough time to begin with coming out of the pandemic, but this additional layer of trouble also makes the euro less attractive.”

    Concerns about Europe’s outlook have increased since the biggest single pipeline carrying Russian gas to Germany, Nord Stream 1, began annual maintenance on Monday. Governments, markets and companies are worried the shutdown might be extended because of the Ukraine war.

    The Federal Reserve is also expected to hike rates further than peers including the European Central Bank.

    Euro sculpture in Frankfurt.
    The ECB is expected to raise rates by 25 basis points at its July 21 meeting, the first increase since 2011.
    AP

    Traders ramped up bets after the inflation print that the US central bank could raise rates by 100 basis points when it meets on July 26-27. A hike of at least 75 basis points is seen as almost certain.

    Atlanta Fed President Raphael Bostic on Wednesday said that the higher-than-expected June inflation might require policymakers to consider an increase of 100 basis points at the meeting.

    The ECB is expected to raise rates by 25 basis points at its July 21 meeting, the first increase since 2011.

    The euro’s depreciation is unlikely to influence its rate path. The ECB is watching the euro exchange rate because of its impact on inflation but does not target a specific level, an ECB spokesperson said.

    The Canadian loonie gained after the Bank of Canada raised its benchmark interest rate by a full percentage point, surprising markets with its biggest rake hike since 1998.

    The greenback fell 0.39% against the Canadian currency to C$1.2967.

    The US dollar gained 0.31% against the Japanese yen to 137.33, after earlier hitting a 24-year high of 137.81.

    In the cryptocurrency market, bitcoin gained 2.43% to $19,791.



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