Since the beginning of 2022, the European currency has noticeably fallen in price on the international market.

Over the past four months, the euro has fallen by 7.3% against the dollar and is now close to $1.054.

At the same time, at the end of April, the indicator briefly decreased to $1,047, the lowest level since January 2017.

The observed dynamics is largely associated with a sharp deterioration in the situation in the European economy.

This opinion was shared with RT by the head of the global research department at Otkrytie Investments, Mikhail Shulgin.

“The weakness of the euro against the dollar is due to several fundamental factors.

Among them, for example, the energy crisis in the EU due to high oil prices and the risk of disruption of gas supplies from Russia.

In addition, there is a threat of stagflation or even recession in Europe against the backdrop of the Ukrainian conflict,” Shulgin said.

Recall that since the end of February, the European Union, together with the United States and some other states, continue to impose new economic sanctions against Russia.

This is how the West reacts to the conduct of a military special operation in Ukraine.

According to experts, the EU restrictions on Moscow have led to a significant increase in the cost of energy in the region.

This, in turn, resulted in a record increase in the cost of a number of other goods and services.

Thus, according to preliminary estimates, in April, the annual inflation rate in the eurozone rose to 7.5%.

The value was the highest for the entire time of observation, as evidenced by Eurostat data.

In the current circumstances, extremely pessimistic consumer sentiment is recorded in European countries.

Evgeny Mironyuk, an expert on the stock market at BCS World of Investments, told RT about this.

“For example, in Germany, the expectations of citizens regarding future incomes have deteriorated, the propensity to save has increased, which will hinder economic growth.

In the future, the reduction in consumer spending will affect both corporate and government revenues,” Mironyuk said.

At the same time, the situation is aggravated by the growing disagreements between the EU states regarding further sanctions policy against Moscow.

This point of view in a conversation with RT was expressed by Alexander Razuvaev, a member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers.

Earlier, the European authorities actively discussed the imposition of an embargo on the import of natural gas and oil from Russia.

However, the countries of the region have not reached unity on this issue.

A number of EU states were categorically against the ban on the purchase of raw materials from the Russian Federation.

Moreover, while some EU countries refused to pay for Russian gas in rubles, some members of the association nevertheless agreed to Moscow's conditions. 

“What is happening now against the backdrop of new rules for paying for gas from Russia clearly demonstrates that many contradictions have ripened in the EU.

Not all countries are ready to make any compromises and infringements for the sake of a single political line of the union.

This is also one of the reasons for the weakening of the euro,” Razuvaev said.

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In addition, the pressure on the euro is exerted by the general strengthening of the US currency on the world market.

Thus, since the beginning of 2022, the dollar index (DXY) against a basket of other reserve currencies has grown by almost 8% and in April exceeded 103.9 points for the first time in 20 years.

The dollar began to rise in price after the US Federal Reserve System (FRS) raised its base interest rate from 0-0.25 to 0.25-0.5% per annum in March.

According to Mikhail Shulgin, by the end of this year, the value may grow to 2.5-2.75% per annum.

Such tightening of monetary policy traditionally cools economic activity in the country and thus helps to contain inflation, and also helps to strengthen the national currency.

To support the euro and fight price increases, the European Central Bank (ECB) could also raise its rate.

However, under the circumstances, this decision will be difficult for the regulator, Mikhail Shulgin believes.

“According to some estimates, by the end of the year the ECB deposit rate may rise from the current -0.5 to 0.5% per annum.

However, these expectations may not come true, as high energy prices, the crisis in gas supplies from Russia and the situation in Ukraine could have a significant negative impact on economic growth in Europe, preventing the ECB from raising the rate to 0.5%,” the specialist noted.

According to analysts, in the current environment, the European currency will continue to fall in price against the US.

Moreover, by the end of 2022, the emergence of parity is not excluded, experts say.

In other words, the dollar and euro rates may become equal.

The last time a similar situation could be observed back in 2002.

“The exact timing of parity depends on the further policy of the ECB, how the regulator will support the euro and whether it will raise the rate.

I think the mark of 75 rubles per euro and dollar will become a benchmark.

This is an objective and comfortable milestone for the Russian financial system,” Alexander Razuvaev concluded.