The Euro Has Retreated Below Parity With The Dollar

The euro fell below parity versus the dollar again on Wednesday, heading for its third consecutive monthly decrease as a looming energy crisis adds to recession fears and the European Central Bank continues to raise interest rates.

Russia has blocked gas shipments from the Nord Stream 1 pipeline, escalating an economic conflict between Moscow and Brussels and raising the threat of a recession and energy rationing in some of the world’s wealthiest countries.

Traders are concerned that gas supplies via the pipeline will not resume once the planned maintenance concludes on Saturday. A growing number of ECB members are asking for large rate hikes to tackle rising inflation, which is expected to approach 10% in the coming months.

Money markets have fully priced in an ECB rate hike of 50 basis points, with a more than 60% possibility of a larger 75 basis point boost.

The dollar, that measures the greenback against a basket of six currencies, was last up 0.3% at 109.10, just shy of the two-decade high of 109.48 set on Monday.

The index is on course for its third month of gains, having increased more than 3% in August.

Throughout 2022, the pound’s value has progressively declined, and it is now worth little more than the dollar and the euro.

It comes as the United Kingdom prepares to face what the Bank of England predicts will be the country’s longest and deepest recession since the 2008 financial crisis.

Soaring inflation and energy prices have plunged the country into a cost-of-living catastrophe, forcing millions of low-income families.

Currencies

£1 is currently worth $1.161 at the current exchange rate. This indicates that one dollar is worth 86 pence.

Because the dollar and euro are currently equal, £1 equals €1.161, and €1 is worth 86p.

This had decreased dramatically from the beginning of the year when £1 was worth $1.13.