The euro and the dollar are a penny away from parity for the first time in 20 years
'This is the day Putin fights back against Europe', says Nic RobertsonReplayMore Videos ... (16 Videos)'This is the day Putin fights back against Europe', says Nic Robertson'America's job machine is firing on all cylinders': Romans on the June jobs reportRecession is likely coming. How bad will it be?Child care costs are rising. See how parents are copingCiti chief economist: Recession risk is risingSchwab top strategist: Consumers 'much better prepared' for downturn compared to Great Recession'Pay rent or buy some food': Millions of renters unsure if they can make rentShrinking UK economy could lead to a recession amid 40-year high inflationPowell: Recession after rate hikes certainly a possibilityWarren to Powell: Don't drive this economy off a cliffAnalyst: Gas tax holiday 'won't change people's behavior'Gary Cohn: Fed was late on interest rate hikesExecutives torn on recession risk as fears grow for global economyThe Fed anticipates more rate increases after announcing biggest hike in 28 yearsWhat the interest rate hike means for youRealtor.com chief economist shares her advice for homebuyers and sellersNew York (CNN Business)For the first time in 20 years, the exchange rate between the euro (EUU) and the US dollar is nearly the same -- the two currencies are less than one cent away from parity.
The euro hovered around $1.007 on Monday morning, down nearly 15% since the start of the year. Fears of recession on the continent abound, stoked by high inflation and energy supply uncertainty caused by Russia's invasion of Ukraine. The European Union, which received roughly 40% of its gas through Russian pipelines before the war, is attempting to reduce its dependence on Russian oil and gas. At the same, Russia has throttled back gas supplies to some EU countries and recently cut the flow in the Nord Stream pipeline to Germany by 60%. Now, that critical piece of gas import infrastructure in Europe, has been shut down for scheduled maintenance due to last 10 days. German officials fear that it may not be turned on again. The energy crisis comes alongside an economic slowdown, which has cast doubts over whether the European Central Bank can adequately tighten policy to bring down rinflation. The ECB announced that it will hike interest rates this month for the first time since 2011, as the eurozone inflation rate sits at 8.6%.Europe hasn't been this cheap for Americans in decadesRead MoreBut some say the ECB is far behind the curve, and that a hard landing is all but inevitable. Germany recorded its first trade deficit in goods since 1991 last week as fuel prices and general supply chain chaos significantly increased the price of imports. "Given the nature of Germany's exports which are commodity-price sensitive, it remains hard to imagine that the trade balance could improve significantly from here in the next few months given the expected slowdown in the Eurozone economy," Saxo Bank foreign exchange strategists wrote in a recent note.A series of aggressive interest rate hikes by central banks, including the Fed, coupled with slowing economic growth will keep pressure on the euro while sending investors toward the US dollar as a safe haven, say analysts. The US Federal Reserve is well ahead of Europe on tightening, having hiked interest rates by 75 basis points while indicating that more rate increases will come this month. This safe haven retreat into the US dollar could become even more extreme if Europe and the US enters a recession, warned Deutsche Global Head of FX Research George Saravelos in a note last week. A situation where the euro is trading below the US dollar at a range of $0.95 to $0.97 could "well be reached," wrote Saravelos, "if both Europe and the US find themselves slip-sliding in to a (deeper) recession in Q3 while the Fed is still hiking rates."That's good news for Americans with plans to visit Europe this summer but could spell bad news for economic global stability. Click Here To Get Funded!