Weaker than the dollar: why the European currency has fallen in price on the world market since 2002

On Wednesday, July 13, in international trading, the European currency for the first time in almost 20 years was cheaper than the American one.

This is evidenced by the data of the TradingView platform.

In the afternoon on the world market for €1 they gave $0.9998.

The last time such a course could be observed was in early December 2002.

The European currency continued to weaken against the US, after the day before the dollar and the euro briefly equalized during global trading.

Investors are increasingly worried about the deteriorating prospects for the eurozone economy, which puts pressure on the single currency, experts say.

“A serious economic crisis has matured in Europe, which was mainly caused by anti-Russian sanctions.

European countries massively imposed restrictions against Moscow, which negatively affected their own economic indicators, including a record acceleration in inflation, ”Alexander Razuvaev, member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers, explained to RT.

According to preliminary estimates by Eurostat, in June inflation in the eurozone accelerated to 8.6% in annual terms - the highest level in history.

Earlier, UN economists called the current situation with prices a shock for the European economy and did not even rule out the possibility of a recession in a number of EU countries.

A similar point of view was expressed in an interview with RT by BitRiver financial analyst Vladislav Antonov.

In his opinion, the main blow to the European economy was the demonstrative refusal of the EU countries from energy resources from Russia.

At the same time, the European Union today does not have the opportunity to quickly replace Russian raw materials, which is why fuel in the region is rapidly becoming more expensive, the expert emphasized.

“With high prices, the German government, for example, is already preparing to distribute gas to end consumers.

Along with this, panic is growing in Europe due to the planned shutdown of the Nord Stream for repairs.

The EU fears that Russia will not resume pumping gas through the pipeline in retaliation for the sanctions.

However, despite the critical situation, they are already preparing the seventh package of sanctions,” Antonov said.

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The observed weakening of the euro indicates that forecasts about the onset of a systemic crisis in the euro area are beginning to come true.

This was announced yesterday by Deputy Chairman of the Russian Security Council Dmitry Medvedev.

“First, the EU members shot themselves in the head with a sanctions pistol.

Now they are reaping the bitter fruits of a decline in production, supercritical food inflation, the loss of competitiveness of their goods and the expectation of winter in ice dwellings without our gas.

In global terms, this is confirmation of the extremely ill-conceived nature of the sanctions against Russia, ”Medvedev wrote in his Telegram channel.

According to him, Europe today is paying for the sanctions war unleashed by the US and Britain against Russia.

At the same time, Washington and London themselves were less affected by the restrictions imposed and "broke the Europeans like thimble-makers," Medvedev stressed.

“When starting an economic massacre, it was necessary to calculate their own monetary and economic problems, and not just introduce bad restrictions.

In the White House this formula, unlike the Brussels dogs of war, apparently knows incomparably better.

They punish their loved ones much less often, measuring out the consequences for a long time.

But the “useful European idiots” suffered much more at the mercy of the Americans,” added the deputy chairman of the Security Council.

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With an eye on the USA

In addition to the general deterioration of the situation in the European economy, the weakening of the euro against the dollar may be due to the emergence of fresh data on inflation in the US, analysts say.

According to the estimates of the US Department of Labor, in June, the growth rate of consumer prices for goods and services in the United States accelerated on average from 8.6 to 9.1% in annual terms.

The value reached was the highest since November 1981.

Previously, market participants predicted inflation in the US at 8.8% for the first summer month.

As prices in the United States rise faster than expected, the Federal Reserve System (FRS) of the country will pursue an even tighter monetary policy and actively raise interest rates.

Dmitry Babin, an expert on the stock market at BCS World of Investments, shared this opinion in an interview with RT.

Note that since the beginning of 2022, the US Federal Reserve has already raised its interest rate three times and raised it from 0-0.25 to 1.5-1.75% per annum.

Such tightening of monetary policy is designed to cool economic activity in the country and thereby curb inflation.

“With US inflation once again hitting a 40-year high, the Fed will be forced to continue aggressively raising rates.

The European Central Bank (ECB) is lagging behind in this regard, which is why the difference between the interest rates of the two regulators will increase.

As a result, investing in euros will become even less profitable for investors compared to dollars, and the weakening of the European currency will continue,” Dmitry Babin explained.

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Note that for more than six years, the ECB rate has consistently remained at 0% per annum.

Experts do not exclude that in the near future the European regulator will also move to tighten monetary policy to combat inflation and support the national currency.

However, such actions could further weaken the eurozone economy, analysts warn.

“The ECB, unlike the Fed, simply cannot afford to raise rates at such a pace, given the high levels of public debt in individual eurozone countries and the prospect of a recession in the region.

The European economy is stagnating and approaching a recession, so it is very likely that the euro can become cheaper than the dollar for a long time, ”Artyom Deev, head of the AMarkets analytical department, suggested in a conversation with RT.

According to Dmitry Babin, in the near future the cost of €1 on the world market will continue to fluctuate around $1, but in the future it may drop to $0.9-0.95.

In turn, on the Moscow Exchange, the dollar and euro rates will remain in the range of 57-60 rubles for the time being, the expert is sure.

At the same time, Artyom Deev admits that in the foreseeable future, both values ​​will begin to move towards 70 rubles.