European Currency Close To Reaching Parity Against Dollar

An anonymous reader quotes a report from Bloomberg: Europe's common currency edged closer toward parity with the US dollar Monday as energy concerns and the risk of recession weighed on the outlook for the euro area, while risk aversion fueled a broad rally in the greenback. The euro dropped as much as 1.3% to $1.0053, eclipsing its low from last week. The last time it was this low was back in 2002. The currency's downward spiral has been swift and brutal, 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. George Saravelos, global head of FX research for Deutsche Bank, told Bloomberg Surveillance Monday he could see the euro moving under parity, especially in the scenario of a "complete gas shutoff" from the Nord Stream 1 pipeline. The bank is pricing the euro to move in between a range of 0.95 to parity against the dollar, he said. "I really wouldn't say 0.95 would be unreasonable," Saravelos said. "Even if this gas returns in terms of full flow after the maintenance period, the (risk) premium is unlikely to go away. And I think that's a critical thing that's changed over the past few weeks."

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