As recession fears rise, the euro hits a 20-year low.
The euro fell 1.3% by midday in Europe and was worth $1.029. It was $1.028 earlier.
On Tuesday, the value of the euro fell to its lowest level in twenty years. Rising gas prices and the fact that the conflict in Ukraine didn't look like it was going to end made people worry about a recession in the euro zone.
During the trading session, the euro dropped almost 1.3%. By the middle of the afternoon in Europe, it was worth $1.029, down from $1.028 earlier in the day.
In June, inflation in the euro zone hit an all-time high of 8.6%. This led the European Central Bank to tell the markets ahead of time that it planned to raise interest rates at its July meeting for the first time in 11 years.
But growing worries about a possible recession may make it harder for the central bank to tighten monetary policy. Monday's release of the July Sentix Economic Index showed that investor confidence in the 19 countries that make up the euro zone has dropped to its lowest level since May 2020. This means that a recession is "inevitable."
On Tuesday, the value of the euro fell to its lowest level in twenty years. Rising gas prices and the fact that the conflict in Ukraine didn't look like it was going to end made people worry about a recession in the euro zone.
During the trading session, the euro dropped almost 1.3%. By the middle of the afternoon in Europe, it was worth $1.029, down from $1.028 earlier in the day.
In June, inflation in the euro zone hit an all-time high of 8.6%. This led the European Central Bank to tell the markets ahead of time that it planned to raise interest rates at its July meeting for the first time in 11 years.
But growing worries about a possible recession may make it harder for the central bank to tighten monetary policy. Monday's release of the July Sentix Economic Index showed that investor confidence in the 19 countries that make up the euro zone has dropped to its lowest level since May 2020. This means that a recession is "inevitable."
Moving Markets
Over the past few months, the price of gasoline has been steadily going up, which has made Europe's already record-high inflation rate even worse.
On Monday, natural gas prices in Europe kept going up and hit a new high that hadn't been seen since the beginning of March. This was because planned strikes in Norway added to worries on the market about supply cuts from Russia. The front-month gas price at the Dutch TTF hub, which is a European standard for trading natural gas, recently reached 175.5 euros ($180.8) per megawatt-hour after trading activity went up by 7.8 percent.
All of these things have had a big effect on the euro because they all happened at the same time. Since the beginning of the year, one dollar is worth more than 9 percent less in terms of the currency used in the countries that make up the euro zone.
In the meantime, the dollar remains strong, both because investors who don't want to take risks are looking for a safe place to put their money and because the Federal Reserve of the United States has started what looks like an aggressive rate-hiking plan.
In June, the Federal Reserve raised the benchmark interest rate by three-quarters of a percentage point. Federal Reserve Chair Jerome Powell has said that the central bank may raise interest rates by the same amount in July.
Also, the euro lost a small amount of value against the pound, trading at £0.8595 in the middle of the afternoon, and it lost almost 1.2 percent of its value against the Japanese yen, which is getting close to multi-decade lows against a stronger dollar.