FX.co ★ EUR slides towards USD parity

It seems that the US dollar is making every effort to cool down gold and approach parity with the euro. Some analysts are sure that the euro will fall even below one dollar early next year.

The fact is that the single currency is on the verge of US dollar parity for the first time in two decades. The list of ailments that are troubling the eurozone economy is really impressive: the highest inflation in history, energy insecurity, and a risk of recession. All these factors have an extremely negative effect on the euro that may reach parity with the greenback in the near future. Notably, the currency of 19 European states has not dropped to or below the one-to-one exchange rate with the US dollar for two decades. Most analysts predict even a deeper decline. “One euro will be worth one dollar by the end of the year and fall even lower early next year,” analysts at HSBC foresee. “We find it hard to see a silver lining for the single currency at this stage,” they wrote.

“The outlook for the euro now is very, very tied to the energy security risk,” Jane Foley, a currency strategist at Rabobank, said. “For traders, the risks intensified after Russia cut off gas sales to Poland and Bulgaria late last month,” she added. If gas supplies to Europe are shut off either by the embargo imposed by the EU or by Russia itself, the region is likely to plunge into recession.