Euro edges closer to parity with dollar amid recession fears and prospect of further US rate cuts

The euro edged closer to parity with the dollar as fears of a recession and the prospect of more aggressive interest rate hikes in the United States boosted the greenback.

The single currency fell to $1.0054 – its weakest level in 20 years – while sterling fell below $1.19.

Sterling and the euro have been hit by a worsening economic outlook as inflation rises.

Recession fears: The single currency fell to $1.0054 – the weakest level in 20 years – while the pound fell below $1.19

The deepening energy crisis in Europe – where the largest pipeline that supplies Russian gas to Germany began to be shut down for ten days for maintenance – also took its toll.

There are fears that the shutdown of Nord Stream 1 could last even longer because of the war in Ukraine, hurting German households and businesses and disrupting plans to fill storage for the winter.

At the same time, the dollar was pushed higher by expectations that the Federal Reserve will begin another big hike in interest rates as it steps up its fight against inflation.

Official data tomorrow could show US inflation rising further above the current 41-year high of 8.6 percent, prompting the Fed to act.

With the dollar already at a 20-year high against a basket of world currencies, analysts have warned that the outlook for the euro is bleak.

“With little economic relief for Europe on the horizon and US inflation data likely to mark a new high for the year and prompt the Fed to move aggressively, we believe risks remain skewed in favor of the dollar,” said Jonas Goltermann of Capital Economics. .


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