Dollar-euro parity for the first time in almost 20 years as recession fears mount
One market analyst writes that the euro is"burning" because of the European Central Bank's lack of action against inflation while the dollar becomes even more attractive given the expected path for rate hikes and equity caution.The US dollar and European single currency came within a whisker of parity for the first time since 2002 on Tuesday morning, as financial markets fret over the likelihood of a global recession ahead.
The euro fell officially as low as $1.00001, according to Refinitiv data, before clawing back some ground after the scare. There had been market talk that parity had technically been achieved, though that was later discounted by updated figures. Analysts say it is only a matter of time though as the dollar, a place of refuge for investors globally in uncertain economic times, squares up to aThe US central bank has taken aggressive action on inflation, with interest rate hikes also traditionally supporting a currency's strength.Its counterpart in Frankfurt is yet to raise rates, having only just completed its pandemic-related support for growth.
The European Central Bank even has a negative main interest rate to encourage lending but has signalled it will raise rates this month as the single currency area squares up to soaring inflation and the prospect of a mighty energy crunch ahead of the winter.
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