With recession worries growing, the euro drops to a 20-year low against the dollar

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Last Updated on September 25, 2022 by Bitfinsider

On Tuesday, the euro dropped to its lowest point in twenty years, dropping more than 1% for the day to touch $1.0283.

It happens as worries about a euro zone recession rise, gas prices skyrocket, and the Ukraine crisis shows no signs of ending.

The European Central Bank informed the markets in advance of its intention to raise interest rates for the first time in 11 years at its July meeting as a result of the record 8.6 percent inflation rate in the euro zone in June.

The ability of the central bank to tighten monetary policy, however, may be constrained by escalating recessionary fears. Investor confidence in the 19-country euro zone has fallen to its lowest level since May 2020, according to the July Sentix Economic Index released on Monday, signaling a “inevitable” recession.

The recent increase in gas prices has contributed to Europe’s record-high inflation rate.

As planned strikes in Norway added to market concerns over Russian supply cuts, natural gas prices in Europe continued their steady increase on Monday, reaching highs not seen since early March. A benchmark for natural gas trading in Europe, the front-month gas price at the Dutch TTF hub yesterday saw trading up 7.8% to touch 175.5 euros ($180.8) per megawatt-hour.

These factors have combined to negatively impact the euro. Since the beginning of the year, the euro zone’s currency has lost more than 9% of its value relative to the dollar.

Meanwhile, as risk-averse investors look for safe havens and the U.S. Federal Reserve begins what appears to be an aggressive rate hike regime, the dollar’s surge continues.

The central bank could increase interest rates by a comparable amount next month, according to Fed Chair Jerome Powell, after hiking benchmark interest rates by three-quarters of a percentage point in June.


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Disclaimer: Above are some affiliate links and we may collect a share of sales or other compensation from the links on this page.
Disclaimer: The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, legal, tax or other advice. Investing in or trading cryptocurrency or stocks comes with a risk of financial loss.

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