London July 13 2022: One euro is now worth the same as a single US dollar for the first time in two decades after a historic slide in Europe’s shared currency.
The euro fell to trade just below $1 for the first time since 2002. It has weakened around 12% so far this year.
The currency’s downward spiral to parity has been incredibly rapid, given it was trading around $1.15 in February. A string of increasingly-large Federal Reserve interest-rate hikes has supercharged the dollar, while Russia’s invasion of Ukraine has worsened the outlook for growth in the euro zone and pushed up the cost of its energy imports.
That leaves the European Central Bank in a bind. It has so far resisted the kind of aggressive policy tightening deployed by central banks across the world, signaling it will raise borrowing costs by a quarter-point later this month. That’s likely to maintain a widening interest-rate differential that will keep the pressure on the common currency.