The euro hits the lowest level against the dollar since it came into circulation in 2002


The euro sank below the threshold of parity with the dollar on Monday, to a level more seen since the year of its introduction, weighed down by the energy crisis which threatened to plunge Europe into recession. The greenback benefiting for its part from the successive tightening of the American Federal Reserve (Fed), the euro lost 0.96% around 3:30 p.m. GMT (i.e. 5:30 p.m. in Paris) to 0.9941 dollar, a lowest since 2002.

The strength of the dollar makes imports more expensive, especially for raw materials such as oil, which are priced in dollars, accentuating an inflation that is already devastating for consumers and businesses. “Europe is preparing for another shutdown of the Nord Stream 1 gas pipeline later this month,” Oanda analyst Craig Erlam told AFP.

In question, an energy crisis

Gas giant Gazprom has warned that gas deliveries will be interrupted for “maintenance” from August 31 to September 2, at the risk of reigniting fears of a shortage in Europe, where Russia is accused of energy blackmail.

As a result, the price of European gas (Dutch TTF futures contract) soared again and reached 295 euros per megawatt hour (MWh) on Monday, approaching the historic records obtained in the first days of the invasion of Ukraine. by Russia.

“The sword of Damocles hanging over Europe is gone to stay there,” warns Kit Juckes, analyst at Societe Generale.

And the week could be painful for the euro. For the moment, in 2022, the currency had recovered after having flirted with the parity threshold, but “poor PMI indicators on Tuesday could be enough to anchor the euro under a dollar”, he warns. Because on the other side of the Atlantic, despite a slight weakening of US inflation in July, the US Federal Reserve (Fed) ensures that it will continue to reduce its monetary policy.

“A new opportunity for the Fed to convince the market will be the Jackson Hole symposium” at the end of the week, comments Ulrich Leuchtmann, analyst at Commerzbank. During this meeting of the bankers concerned, the boss of the Fed will speak on Friday.

The book also at the lowest

While the American economy is less used than Europe by the war in Ukraine, the Fed has more leeway to act than the central banks of the Old Continent.

Thus, the British pound has also returned to its 2022 low. “It’s a sell-off year for the pound, which even responds against the euro while the Bank of England has raised its rates at each meeting” since the end of 2021, remind OFX analysts.

Despite these increases, British inflation exceeds 10% over one year and is the highest in the G7, due to the war in Ukraine, the aftermath of the pandemic, but also Brexit which reduces the labor market and further disrupts UK supply chains.

At 1.1764 dollar for a pound, the British currency is at its lowest since the beginning of 2020 and the first months of the pandemic. Prior to that, the British pound had not fallen below $1.18 since 1985.


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