The Euro is on a free fall amid high inflation. It is moving towards US Dollar parity, as the EUR/USD touched multi-year low levels at 1.0340 on May 12.
Euro to Dollar Today Touches 1.0350
The Euro to US Dollar currency pair is on a steep decline. The monthly chart shows a sharp downtrend from the 1.2230 levels to 1.0411.
The EUR/USD slumped towards the 2017 levels. On Friday the EUR/USD fell to 1.0350 but recovered to close at 1.0411. There is a negative trend in the Euro to Dollar today.
The uptrend in the US Dollar has brought weakness to the European common currency. The parity between the US Dollar and the European common currency is drawing closer.
Central Banks Tighten Monetary Policy
Central banks are working towards tightening rate policies as inflation rates are soaring higher. Many central banks are announcing tight monetary policies.
Countries like the US, the UK, and Canada brought in monetary policy tightening to curb surging inflation. Commodity prices are high, caused by the rising crude prices.
The Bank of Japan has not hiked interest rates and continues its loose monetary policy.
President Christine Lagarde may announce a hike in interest rates soon, predict experts. The euro-region requires at least a 50 basis point hike. There is an imminent need for a rate hike in the Eurozone. A rate hike is expected in the forthcoming meeting on July 21.
Economic Disruptions in the Euro Zone
Consumer Price Index (CPI) data came at 8.3% year-on-year in April, much above the forecasted figure of 8.1%. High inflation has hit the economy, as commodity prices are moving higher, affecting the purchasing capacity of households. Inflation is a cause of worry to the forex market, as the Euro to Dollar today trades at the year’s lows.
The Euro manufacturing PMI is at 55.7 from 55.4. The Euro unemployment rate has come down from 6.9% to 6.8%. After the Covid-19 pandemic, the Eurozone showed signs of recovery, but high inflation is the next concern that keeps the manufacturing sector from higher growth.
The German CPI is at 7.8% year-on-year in April. The German retail sales month-on-month has come down from 0.2% to -0.1%. The number of unemployed has come down from -18k to -13k, which is a good indication of the overall health of the economy. Consumer spending improves with good labor-market conditions. The German trade balance has come down from 11.1billion to 3.2 billion. Imports are higher than exports.
Italian manufacturing PMI is at 54.5, moving lower from 55.8. The French Manufacturing PMI shows improvement from 55.4 to 55.7. German Manufacturing PMI has been good, rising from 55.4 to 55.7. Inflation damages the economic activities in Italy.
Most European states are hit by high inflation as the energy crisis hinders economic recovery. It impacts the forex market negatively, pushing the Euro to Dollar today, lower.
Europe Faces Gas Supply Disruptions
The Russian war on Ukraine rages on for more than two months. Supply chain disruptions are high as the country rages. It has hit the economic growth of countries across the globe.
Finland and Sweden are willing to join NATO. But, Russian President issued fresh warnings against the two countries about joining the organization.
The Eurozone faces a standoff with Russia over the supply of natural gas. Russia demands payment in Rubles for the gas exported to other countries. European dealers reject the offer and seek an alternate supply of natural gas. Russia raised sanctions on many European countries that offer support to Ukraine.
The sanctions raised by Russia disrupt the gas supply to Germany, which is the largest customer of Russian gas. Wholesale gas prices saw a hike in prices which has added a burden on businesses and households.
Ukraine shut down a major gas route between Russia and Europe. Kyiv has shut the gas route inflow into Europe that runs through Ukraine. Ukraine supplies food grains to various parts of the world. The war has brought down grain exports from Ukraine.
US Dollar Index Surges
The greenback is at a multi-year high at 104.621. After surging higher to 105.06 levels, the US Dollar slipped to 104 levels.
High volatility in the forex and share market keeps investors wary about their investments. The US Dollar and the Japanese Yen are safe havens that keep investors rushing to the greenback and the Yen amid high turmoil in the forex markets.
After the covid-19 pandemic, the Eurozone faces continuous economic upheavals from the hike in natural gas prices, burdened by supply chain disruptions.
The EUR/GBP is at 0.8488. It dropped to multi-year lows of 0.8201 in March before recovering later. Most currencies are trading at the year lows, affected by high inflation, the covid pandemic, and the Russian war on Ukraine.