HomeFinancial MarketsEuro Dips to 20-Year Low Against USD, Closing in on Parity

Euro Dips to 20-Year Low Against USD, Closing in on Parity

The Euro continued its slide against the U.S. dollar on Tuesday to reach its 20-year low. After holding itself around $1.04 in recent days, Euro is now $1.02, which marks its lowest point since November 2002.

There are quite a few reasons for Euro’s tumble, including European Central Bank’s unwillingness to commit to aggressive interest rate hikes, rising gas prices, and increased demand for the USD. The European Union currency has shed close to 10 percent of its value against the dollar since the start of 2022.

According to Bloomberg, there is a strong possibility that Euro and USD will reach parity by year-end. Their option-pricing model predicted 46 percent chances of parity at the start of the week before hiking it to a 60% chance on Tuesday.

Others believe that parity is not a question of if but when.

“Parity is just a matter of time now,” said Mizuho Bank’s FX expert Neil Jones.

Inflation is taking over the eurozone, but the European Central Bank is yet to show resolution in fighting against it. There are some reports that the 25 basis-point increase in rates is planned for late July, which would be the first for the institution in 11 years.

In the meantime, the Federal Reserve has been aggressive in trying to stomp inflation. It already buffed the rates by 150 basis points, and another 75 basis-point increase is set for later this month.

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